Explores: - Protecting IP Assets - Building the Team - Seeking Financing - Dealing with VCs - Working with Lawyers

1. Starting Up Right and Getting Funded
Mick Bain – mick.bain@wilmerhale.com
Jason Kropp – jason.kropp@wilmerhale.com
Attorney Advertising

2. Discussion Topics
Protecting IP Assets
Building the Team
Seeking Financing
Dealing with VCs
Working with Lawyers
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3. Discussion Topics
Protecting IP Assets
Building the Team
Seeking Financing
Dealing with VCs
Working with Lawyers
© 2014 Wilmer Cutler Pickering Hale and Dorr LLP
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4. Protecting IP Assets
Who owns IP created prior to incorporation?
 Where did it come from?
 Assignment agreements
 Licenses
How do you make sure you own all your IP after
incorporation?
In-licensing issues (universities)
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5. Building The Team
Standardized employment terms:
 At-will employment (offer letters)
 Assignment of Inventions and NDA’s
 Non-competition and non-solicitation agreements
Equity
 Vesting
 When does acceleration of vesting make sense?
Advisors and Consultants
“Professional” Management
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6. Seeking Financing
Sources of capital
 Friends & Family
 Angels
 VC’s
 Strategic Investors
 Banks
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7. Seeking Financing
What are the goals in seed rounds?
 Seek sophisticated seed investors
– Who are “accredited investors”
– Who know angel investing and its risks
– networks
 Seek standard (VC-friendly) terms and conditions
 Speed
 Minimize transaction costs
 Minimize number of stockholders
 Avoid future legal and other hurdles
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8. Seeking Financing
Cash loans
 Pros:
– Easy
– Low transaction costs
– No ownership dilution
 Cons:
– It becomes due, usually within 12-24 months
– May not be viewed favorably by future investors
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9. Seeking Financing
Common Stock
 Pros:
– Easy
– Low transaction costs
 Cons:
– Valuation problems/Equity compensation problems
– Dilution
– Not an attractive investment
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10. Seeking Financing
Preferred Stock
 Pros:
– Less dilution than common stock
 Cons:
– Need to set a valuation
– High transaction costs
– May give up too much control to a seed investor for too little
money
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11. Seeking Financing
Convertible Debt
 Pros:
– Quick
– Low transaction costs
– No current valuation
– Minimizes problems with VCs
– Only minimum control constraints
– Better than common stock for investors because it usually
converts to preferred stock
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12. Seeking Financing
Convertible Debt
 Cons:
– Ultimately issuing more “real” preferred
– Often accompanied by an “equity kicker”
– Current trends include price “ceiling”
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13. Seeking Financing
VCs vs. Angels
 Size of Round
 Potential Exit
 Effect on future financing
 Industry
 Terms
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14. Dealing with VCs
Understand your needs
Define your strategy
Stick to your plan
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15. Working with Lawyers
Bring them on early
Keep them in the loop
Manage the relationship
Wilmer Cutler Pickering Hale and Dorr LLP is a Delaware limited liability partnership. WilmerHale principal law offices: 60 State Street, Boston, Massachusetts 02109, +1 617 526 6000;
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Representative Office. This material is for general informational purposes only and does not represent our advice as to any particular set of facts; nor does it represent any undertaking to
keep recipients advised of all legal developments. Prior results do not guarantee a similar outcome. © 2014 Wilmer Cutler Pickering Hale and Dorr LLP
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