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Tuesday, May 24, 2011

25. Anticipation is Killing ME

Should have posted this yesterday but I was running around with my head cut off.

So tomorrow is the big day and I am freaking out. I really want to get into MassChallenge and just hope it all works out. So tomorrow we will find out if I made the cut. Cross your fingers and pull for me.

24. "Pressure Cooker" Round Judging

 Round 2 with a 10 minute presentation to 5 experts in the field and then 10 of being grilled. Well, I can say it went great. I presented on May 16th at 2:00pm and recorded this video afterwards but I didn't add it to my blog because I needed to check with my lawyers if it would not hurt any intellectual property claims. So I can put it up with no issues. So take a look.

Saturday, May 7, 2011

23. First Cut

Got the  news this morning.....Survey says? Made the cut. That's right folks, got past the first round of judging. Got my pitch assignment: time and date. Looks like I will be pitching 7 judges, in person Monday May 16th between 12-5pm. Pretty excited for the pitch. I was more nervous about the first round because they are just working off of your application and your not sure what the grading criteria is. I always do much better when I can use my enthusiasm and energy, in person, to explain what I am trying to achieve. I'm going to practice pitch two V.C.'s, then some teams from last year, and finally some other entrants for this year to perfect my pitch. (Practice, Practice, Practice) I'm also going to a network event "Perfect Your Pitch" on Monday. Hopefully all of this will make my presentation the best it can be.

A MassChallenge winning team from last year: (Alex Cook and Andy Cook) gave some great feedback on making a great presentation. Thought I would share it because I'm taking there great advice. Thank you Alex and Andy for helping us young fledgling teams.

By Alex and Andy Cook:

1. Build your Deck in the Shower

Starting to build your deck as soon as possible is the biggest favor you can do for yourself. Creating a great pitch deck is like building a great product - it takes lots of little iterations to make one amazing whole. For us, the best ideas and angles on the pitch come to us spontaneously - in the car, in the shower, on a run - so take a notebook with you everywhere†and write down your best ideas as you go. Don't scrap together your deck the night before the presentation.

2. Practice

Once you think you're ready to rock, give as many practice presentations as possible and treat it like you would your real pitch. Give your audience a sheet of questions about your business and have them answer them after hearing your pitch. Read what people write down and see where they are getting confused. Document all the questions that keep coming up frequently, and figure out how to address them more clearly in your presentation. Usually, the same questions keep coming up (How do you make money, how will you get users? Who else is doing this?) so be ready to answer those questions when they come up in judging.

3. Follow the 5/5/45 Rule

Guy Kawaski invented the 10/20/30 rule, which advices that every PowerPoint presentation you give should be less than 10 slides, less than 20 minutes, and all text larger than 30. In MassChallenge, we found that 5 slide decks, 5 minute presentations, and 45 font was the way to go. Put yourself in the judges shoes - they're going to be on a panel for 6 hours and will probably have listened to 10 presentations before you. They may be hungry or tired from having to be attentive for so long. Chances are your judges will also have questions brewing in their minds after your first or second slide.A 5-minute presentation is better than a 10-minute presentation... you'll have 50% more time for Q&A... which leads us to:

4. Use a Short, 5-Slide Deck

Here is the pitch deck that we think will clearly and concisely get your business across to the judges. This pitch deck is based off what worked for us, and is not an official formula or anything. We were given this layout and some amazing coaching on our deck from Christopher Mirabile (@cmirabile) and Bill Kantor during MassChallenge 2011 - thank you!
Problem + Market Opportunity - Where's the pain and how much pain is there? How much money is in the market?
Solution + Grand Vision - What is the optimal, generic solution and what is your big goal? Make sure to paint the big picture of how large you will be, and keep it exciting.
Product + Biz Model-This is the most important slide. Explain what you do in the simplest way possible, and how will you make money. The worst thing that can happen is when you are 18 minutes into the presentation, and you haven't even covered how you make money.
Traction + Data - If you have traction, talk about it. Paying customers are the best form of traction, and a working product or prototype come in close second. Also, if you have real data (CoCA, annual sales, etc) tell about that that too. Use†real and reliable data... don't lie.
Team - Why are you able to pull this off and what makes you better than the competition? Just use general terms about the competition and use†quantifiable†achievements when talking about your team (+5 years in space, started and sold another company, won a competition, etc).

5. Show up Early

Even if you are presenting in the last slot, you should show up as soon as you can to get a feel for the building, run through your presentation, eat, and get in the zone. You are also told who your judges are when you check in, so you could do a little research and maybe figure out what preconceived notions judges may have.

6. Be Yourself!

We wore jeans and Rentabilites t-shirt to our presentation. Dress however you'll feel most comfortable and talk how your normally would. People can tell when you are trying to act.

7. Bring your Power Hitter

If you have multiple team members, have the best presenter do the entire presentation (normally the CEO). You don't want to waste time or lose the judges attention while making switches between presenters. Use your other team members as bench players who come in on specific questions. If you think a team member isn't going to talk or answer a question, he probably doesn't need to be in the room.

8. Be Ready to be Interrupted

Judges are allowed to interrupt you while your presenting. Good ways to tackle interruptions:
  • Give concise answers using data - don't ramble
  • "Great question, thanks for asking - I'm going to get to that in a few slides"
Another good tactic is the "could you repeat that?" †By asking someone to repeat a question it buys you additional time to think of your answer.

9. Be Ready to Demo

If you have a demo, be ready to present it. Some judges may ask to see your website if you are a tech company our your prototype. Having a live site or demonstratable prototype shows you are a serious team. Don't necessarily plan out a demo in your deck - just be ready in case they ask.

10. Don't Argue

Pitching is sales. You wouldn't ever argue with a potential customer and insinuate she is stupid by telling her she is wrong. Tone is important - you can disagree or clarify on something but make sure you don't come across as argumentative. One of the worst situations that can happen to you is that a judge wastes 5 minutes of your time on a trivial topic. When a judge asks you a question, make sure you actually answer the question, and don't ramble. Always use data in your answer if it is relevant. Generally, data is hard to dispute. Round 2 starts soon... go for a run and don't forget your notebook! Feel free to reach us on Twitter (@andygcook @aacook) with any questions.

Wednesday, May 4, 2011

22. Law Firms! Oh Boy!

So I have been shopping for a law firm and I've been told that find a good lawyer is like dating. Well I can definitely say my first two law firms I met were like bad blind dates. They didn't know about founder stock and did not have any other type of billing other than the traditional model. They also looked at me like I was wasting there time. Well I left feeling like a short fat kid on a date with a super model. Rate by the way was $600 hour.

Next I met a firm with that was a jack of all trades and also was a respectable $200 and hour. They didn't know a ton of stuff on the start world and left me questioning if they would be a good fit??? If this was dating I would compare this to your date asking to skip dinner and just go back to your place. If you get my drift.

So, just when I thought I might end up alone and never find my one true love... A fellow start up recommended the law firm they are using. At this point I have stumbled through enough of a learning process to act like I knew what I was doing. Also at this point I also knew what I wanted.

1. Differed billing until my first funding round.
2. Firm that would bill in 1/10th hours.
3. Wanted them to attend my board meetings when I had them, for free, so they were kept appraised of what the company was doing.
4. Was entrepreneurial/start up focused.
5. Actually new what Founder stock was and why I needed it. I'll show an example of this later in this blog.
6. No retainer.
7. I also wanted someone who was hungry. Would hussle. Work hard. Etc. And didn't act like I was a dumb meaningless entrepreneur cockroach.
8. And over all there had to be good chemistry between me and the lawyer.

Well gosh darn it. If this was a dating, it ended up being a magical date that never seemed to end and when it did end it ended with... wink wink, breakfast!

So how about that... I actually have council. I just signed my engagement letter and it is official. The Feinberg Law Group is now partnered with SKINNY prices. To be specific I am working with Jeannette D. McLaughlin and is billed out at $350 an hour.

So here is some other tips when looking fir a law firm;

Ask to get a sample of a bill?

Say, I have heard it is pretty common practice for a lawyer from a firm to attend board meetings, when there held, at no charge. This keeps the law firm abreast of business developments within the start up. Does your law firm offer this?

I would appreciate getting an upper estimate for incorporating and a lowest estimate? This will keep them honest when a bill starts to run up.

I talked to one law firm that bills in 1/10th hourly increments. Is this how your law firm does it?

Most clerical duties are done by a paralegal but are certain clerical activities performed by an attorney billed out at a paralegal’s hourly rate?

I think we discussed this... telephone calls fewer than a certain number of minutes are not billable but what is that limit? How are email exchanges handled?

Can you please send me a written engagement letter that spells out billing arrangements: hourly fees, flat fees, contingent and differed fees, retainers?

Also here is a brief explanation of founder stock:
Yokum Taku at Wilson Sonsini, a top Silicon Valley law firm:
Creation of a Class F Founders stock that has 2:1 board votes per founder and 10:1 voting power over normal common stock.  Class F shares vest monthly, without a typical year-long “cliff,” in order to act as compensation for founding teams, and they offer something called “single trigger acceleration,” which allows one founder to leave without hurting co-founders. Class F holders get acceleration on change in control and approval rights on new investments, liquidity events, Board size, and dividends.

Entrepreneur and investor Sean Parker and Orrick attorney Steve Venuto
“FF Class,” a special stock class that also give founders special rights, but focused mainly on letting them cash out early. This allows founders to cash out a small percentage of their stake in a funding round so they don’t have to wait until the company is sold or goes public.

The FF has a single preference clause that distinguishes it from all other stock. It is convertible to any future class of stock, when certain conditions are true. For example, the holder of FF can convert it into say, a Series B class of stock and sell it to investors, at which point it takes on all the rights and preferences of Series B stock. But it can only be done during the new issuance of that Series B, and only when that Series B is sold to investors; you can’t convert randomly.

Example of why it is needed:
Let’s look at a simplified example to identify some of the problems with common stock. A five-year-old company with $10 million in revenues decided to sell for $50 million in cash. The company has raised $10 million for 25% in preferred stock. The investors have a 1.5 liquidation preference that provides them with $15 million on exit, and they also participate at 1/3 of the remaining proceed as a result of preferred dividends, providing investors with roughly $27 million of the $50 million in proceeds. If you pull 10% off the top for closing related expenses, common stockholders are left with just under $21 million.
In this example, a CEO with 10% in common will stand to earn $2.1 million on a 5x revenue sale for $50 million. An investor with 10% in preferred will stand to earn $10 million. It is likely that the CEO has taken below market compensation for years to get the company off the ground, which may average out to $500,000 of lost wages over five years, assuming that the CEO earned nothing for some period of time. It is also likely that the common shareholders, who are often management and employees, will be asked to bear the burden of an escrow, earn-out, or other type of hold-back. If 20%, or $10 million, is held at the time of close, the CEO would walk away with $1 million, $500,000 of which makes up for lost wages. This simplified example does not factor in the impact of having to purchase options, which diminishes the value of common further. 

Me with my newly signed engagement letter with my Law Firm. Not sure why I'm biting it... I am a goof. But I am a goof with a Law Firm. Booooyaaaaa!

Also a must read:
The Entrepreneur's Guide to Business Law by Constance E. Bagley and Craig E. Dauchy 4th ed.