Monday, April 25, 2011

Out and About

Hey folks -- I'm getting ready to head down to the RTP area for the annual CED Venture Conference.  This year it is in downtown Raleigh, instead of Pinehurst, and looks to be bigger and better than ever.

So, if anyone happens to be in the area on Wednesday or Thursday, send an email or skype me and we can definitely meet up for coffee and/or beer.

One other thing, Zack Mansfield, a good friend with Square Roots has a new blog that is off to a great start.  It looks like he is going to be doing some pretty interesting video interviews with entrepreneurs in the South East.  You should check it out and consider signing up.  Here's the link again.  Also, if you are an early stage start up, talk to Zack.  He knows everyone and the Square Roots program is the best price possible -- free. Click Here to Read More..

Tuesday, April 19, 2011

Securities Law FAIL

Longtime viewers of this blog will recall that one of my favorite memes is -- "Try Not to Violate Securities Laws."  It never ceases to amaze me how easily and often folks violate securities laws.  It is a war of information, people, and we need to spread the truth.

Here is a sign that my good friend, Fred Bryant (@WealthForgeFred), found on Church Hill in Richmond, VA a little while ago:



















Now, while I'm sure that the fine gentleman (gentlewoman?) that posted this advert is an exceptional snow blower, the problem is that this is what we lawyers call a "general solicitation."  And that is a no-no.

Once you have made a general solicitation, you have disqualified yourself from most "private placement" exemptions under state and federal securities laws.  And, without an exemption, pretty much the only way you can do an offering is through a registered IPO.  Moreover, get this, since you made a general solicitation before you had your IPO registration statement on file with the SEC, it will at least delay, if not put an end to, your IPO.

While there has been some recent speculation that the SEC may ease up on the general solicitation prohibition, this is a long way off and the prohibition still stands.  So, please people, Try Not to Violate Securities Laws. Click Here to Read More..

Monday, April 18, 2011

Someone Wrote a Book About Me!

(Well, maybe not a whole book, but at least a short chapter...)

Hey folks!  I know it has been a little while since I've posted anything.  I typically take a break over the winter holidays, but have really let it go for too long.  However, the good news is that I have built up a great big list of post ideas and topics that I'll be working on over the next few weeks.  So there should be a lot more to come...

In the meantime, I wanted to give you a quick heads up about a pretty cool thing.  You may have heard of Gary Vaynerchuk -- author of the New York Times bestseller "Crush It," wine expert and social media master.

He has a new book out called "The Thank You Economy."  Very loosely, it is about how, in today's world, businesses may actually be better off by leaving a little on the table, as opposed to extracting every last nickel.  The main thrust is that in our new normal, always-networked, social-graph driven world, things like a good business reputation, honesty and fair dealing will outlast a given transaction and live with you, potentially forever.  It is actually in your best business/financial interest to deal with people fairly or even favorably, as your reputation will live on in your social graph.

The book is a great read and I highly recommend you pick it up (here it is on amazon).  But what is perhaps the coolest thing for me is that Chapter 13 is called -- "Hank Heyming: A Brief Example of Well-Executed Culture and Intent."  For the newcomers, that's me, Hank Heyming.

I hardly know Gary Vee -- I only met him in person once, at his "secret wine party" during SXSW 2010 (at the Speakeasy) -- and I doubt he remembers me.  However, through some random chance and some intersections in our mutual social media networks, I got to be a part of his latest book.

The chapter focuses on some of the things I have been doing to help nurture the entrepreneurial ecosystem here in the South East.  It also touches on my belief that the last thing a startup needs to be doing is paying a lawyer for basic legal needs.

Here is a link to a SlideShare of the chapter (it is a photocopy so you will need to expand the viewer).  The chapter is only a few pages long and is a quick read -- you should definitely check it out and then go out and buy the whole book.  (For the record, I am only including the photocopy temporarily -- the publisher has promised to make my chapter the one available for free on the book's website, and when they do, I will redirect.)

Anyway, thanks for putting up with a little self promotion.  I'm actually planning to do a longer blog post later this week that will go into more detail on my thoughts on startups and legal fees. Click Here to Read More..

Friday, October 22, 2010

What's Next According to VCs?

On Monday at the Digital East conference, the obligatory VC panel answered the obligatory question on what the new, new thing is going to be.  These sorts of panel questions usually lead to the same answers -- cloud services, social media, programmable web, hey I hear cleantech is going to be big.

But for some reason, this panel gave what I thought were some particularly insightful insights.

  •  E-Commerce is ready to start attacking hard businesses.  John Backus of New Atlantic Ventures started off the discussion with one of my very favorite themes.  Selling books and cds on the web was very web 1.0.  Selling shoes and clothes on the web was very web 2.0.  It's time to figure out how to sell the tricky things -- the unique items, the vintage items, the mass customized items, the collectors items.  In particular, John called out fine wines as an area that he thought the web was ready to solve.  I can think of a half dozen other areas.
  • It's time to take another look at digital media.  John Backus also hit one of my other favorite themes right on the head by noting that digital media is just beginning to take flight on the internet.  The ad spend in digital media is finally gaining momentum and the predictions and trends are all beginning to come true.  My sweet spot in this area is digital music -- as I've told anyone that will listen, digital music is still fighting World War I.  It's time to get out of the trenches and embrace some of the new technological developments to harvest the money that is becoming available.  
  • The new internet is perfectly situated to provide the "last mile" of bricks and mortar commerce.  Don Rainey of Grotech Ventures discussed this hyper local meets internet 2.0 trend, my third favorite theme.  Using an analogy to the last mile of phone and internet services to your home, Don noted the many tools that the internet was developing for small and mid-sized business to reach out to and acquire customers in efficient and inexpensive ways.  He also noted how the internet can help these small businesses with time sinks such as appointment setting.
Some great and unexpected thinking.   

Click Here to Read More..

Wednesday, October 20, 2010

Identity through Design

(Originally posted on youNEQ on 7/25/10)

This weekend, I watched "Helvetica" again.  If you haven't seen it before, it's a wonderful documentary about the history of the Helvetica font.  What makes it such a good re-watch is that, as it explores the history of Helvetica, it also manages to explore the entire history of post-war graphic design.  And during this exploration you encounter many of the great graphic design luminaries of the past 70 years.

What struck me this time in particular was the the notion that we express our identity through our design choices.

The last statement of the movie is by Rick Poynor, a noted thinker on cultural criticism and design theory. His final thought is roughly the following:
To care about [design] in the way that you care about the clothing you are wearing, as an expression of who you are, or your haircut ... or how you decorate your apartment ...  
We accept the idea of identity being expressed in that way, through these consumer choices, well now it’s happening in the sphere of visual communication and there’s no reason -- as the tools become ever more sophisticated -- why this just won’t go on developing and developing and developing.
I think that Mr. Poynor is exactly right and I also believe that there is no reason that this line of analysis is limited to graphic design.  People want everything in their life to speak to them and their personal identity -- including their belongings.  Belongings can also work as an expression of self and identity.  People should not simply be limited to making "consumer choices" when they choose how to express their identity.   This is one of the cornerstones of the youNEQ project.  We look forward to exploring it with you. 

-- Hank
Click Here to Read More..

Tuesday, October 19, 2010

Find the Truth...

Today, at the Digital East conference in Tysons Corner, Don Rainey of Grotech Ventures made a sage observation -- he said:
When we look at a startup.  We look for a commitment to test, to trial and error, to finding the truth.  That's what we are looking for.
To me this speaks to a fundamental philosophy of startups.  Are you coming at your idea with a commitment to discovery?  Or are you coming at it with a commitment to entitlement?

In today's startup environment there is a significant amount of lip service paid to "lean startup" methodologies and etc.  However, checking into the self professed lean startup movement is only meaningful if you can adopt the three principles Don hits --  Are you committed to testing?  To trial and error?  And most importantly, are you committed to finding the truth?  Because, believe me, the truth is out there.  There is a business model that will work for your idea.  The trick is discovering it and the path is through iteration and experimentation. Click Here to Read More..

Sunday, October 17, 2010

Some Housekeeping

Hey folks,

Just a quick housekeeping post.  First, I wanted to give you a heads up on some great events coming up that I will be attending -- if you will be at any of these, shoot me a text or email and we can meet up.

The first is Digital East happening tomorrow, October 18th, in Tysons Corner.  My good friends at Network Solutions are one of the many sponsors.  The conference is sold out, so I've got high hopes for it.

Next is The Venture Forum's Top 25 of the Last 25 event on October 27 at Center Stage in Richmond, VA.  This event is going to highlight the top 25 central Virginia entrepreneurs from the last 25 years.   Should be a great event and a good opportunity to check out the new Center Stage complex.

Then, on November 17 and 18, I'll be at the Internet Summit 2010 in Raleigh.  This is co-hosted by my great friends at Southern Capitol Ventures (the hardest working VCs I know).  I went last year and it was a fantastic event.  Should be even better this year.

Last, don't forget SXSW.  It is still a few months away, but I'm already pretty excited for it.  I may have two companies ready to demo there and I've got my fingers crossed about doing a panel presentation.  See you there.

On the blogging front, I know I've been relatively quiet on this blog.  Recently, I have been focused on the youNEQ project as well as a different digital media project.  I have been blogging a bit on the youNEQ blog and will start cross-posting some of the generally applicable ones over here.  I am also working on some new posts for this blog too.

All my best,

Hank Click Here to Read More..

Wednesday, September 1, 2010

Put Your LLC Operating Agreement into Writing

As I have mentioned several times in the past (here and here), LLCs, while very useful for general business purposes, are generally discouraged when a company is planning on seeking institutional venture capital.  However, despite this general discouragement, folks keep forming LLCs.  This blog post contains some words of advice for those folks.

PUT YOUR OPERATING AGREEMENT INTO WRITING.

That is the short version.  Here is the longer version.  In Delaware, the state supreme court has determined that, if you have an unwritten arrangement involving an LLC that cannot be performed within one year, that arrangement is unenforceable. 

For example, say you get together with your other two founders and decide “Hey, it would cost money to hire a lawyer and draft a written operating agreement for our new LLC that we formed on LegalZip.  We’re all buddies.  Let’s just agree and shake hands to split the equity in thirds and to vest the equity with a one year cliff and then monthly over two more years.  That way we all have incentive to stick around.”  Boom, unenforceable.  A Delaware court would likely rule that all the equity was fully vested from day one.  This is not good if you are the founder that sticks around after the other two flake out and go back to grad school.

If any of you are junior legal achievers, you might point out that your LLC was formed in Kansas, not Delaware.  So what do you care what a Delaware court says?  Honestly, that is a relatively good point.  Unfortunately, the State of Delaware has a long history of being the “go to” state for corporate formation.  This means that their laws are very well developed in this field – much better developed that almost any other state.  Consequently, most other states look to Delaware law for guidance when they come across interesting issues like this one.  So, even if you are in Kansas, you may still be out of luck.

The moral of the story is, put your agreement into writing.  This is almost always the moral of the story, but it is especially relevant to your LLC.  Even if you and your co-founders type up some notes and all sign at the bottom, you would usually be better off than having nothing.  As Samuel Goldwyn said “a verbal contract is not worth the paper it is written on.”  
Click Here to Read More..

Monday, August 16, 2010

Please Vote for My SXSW Panels

Hi folks,

It is that time of the year when, under the guise of crowdsourcing panel ideas, SXSW gets us to mention them a lot and drive traffic to their site.  Be that as it may, I would still very much appreciate your vote for one or more of my panels...

You will have to create a quick account (takes 10 seconds) and then you can give me the green thumbs up (or if you are feeling testy, I suppose you could give me the red thumbs down).

My first panel is called:  Eleven Key Mistakes Every Startup Can Avoid.  It is actually not a panel, but a dual presentation that I am putting on together with my friend David Jones, a VC at Southern Capitol Ventures.  We are going to focus on what I like to call the "dumb" mistakes.  These are mistakes we see folks making over and over again that are really very easy not to make.  Also, some of these can be quite painful to fix -- so why not do it right from the beginning?  We are going to run through the 11 mistakes fairly quickly using real world examples and then throw it open to the audience to ask questions about starting up and the quest for VC.  Last year, I felt like there was a real void of and strong demand for a straightforward, nuts and bolts presentation on setting up your start-up to maximize your funding chances.  So this is my shot at providing it.  Here is the link again:  Eleven Key Mistakes Every Startup Can Avoid.

My second panel is a bit more technical and is focused on the music space.  It is called Spectrum Bias and Streaming Royalties.  We will focus on the basic fact that the FCC's current royalty system is unfairly biased against internet radio and in favor of FM radio (and to a lesser extent satellite radio). Royalty payments range drastically from zero to a huge number, based solely on the spectrum of the radio wave transmitting the song.  There are some key differences in how the various spectrums can monetize, but it is not clear that this makes up for the imbalance in royalty rates.  As an aside, I originally titled the panel: "Forget the Ocean, It's the Size of the Wave", but my SXSW reviewer thought that was a bit too risque...  My friend Joel Erb from SpotTrot will be on the panel among others.  Click here to vote for me:  Spectrum Bias and Streaming Royalties.

I should also mention two other panels that friends have proposed.  The first comes from my partner, Dave Meyers, and it focuses on the long and winding road to an IPO.  It is called Show Me the Money:  Doing the IPO Dance.  Dave is great on this subject and will have a lot of war stories and practical advice on the good and the bad that comes with attempting an IPO.  The second I have mentioned before, but bears mentioning again.  It is a panel on the legality (or lack thereof) of crowd funding a startup in the US.  It is being put on by Fred Bryant at Wealthforge and is called Crowd Funding Your Startup -- Without Going to Jail.

Thanks in advance for your support.  More substantive posts coming later this week!
Click Here to Read More..

Friday, August 13, 2010

More Thoughts on Crowdfunding your Startup

Today, I attended a great RTP event featuring Mark Cuban.  (Thanks to my friends at Southern Capitol and Intersouth for sponsoring it).

The event triggered many thoughts about entrepreneurship that I will share over the weekend.  However, the most interesting part of the event was probably a discussion on the panel that focused loosely on crowd funding.

I've recently been thinking a lot about crowdfunding startups and the various legal and regulatory hurdles to making this a reality.  In my mind, our current regulatory scheme is a classic baby/bathwater problem where our government, in the interest of protecting against a small number of bad actors, has instead made it exceptionally difficult for the vast majority of honest, hard working Americans to invest in startups and share in that portion of the American dream.

The flip side of this is that our government has made it exceptionally difficult for most startups to find sources of equity capital.  The recent changes limiting who can qualify as an "accredited investor" are just the latest of many examples.

On today's panel, there was a great discussion of exactly this issue.  It began with Mark Cuban stating:
We don't have a country of investors anymore.

His point was that innovation is driven by both entrepreneurs and investors and that, without both, innovation and our country will suffer.

Mark's first recommendation was to eliminate capital gains tax on any equity held for more than 5 years.  This would benefit both the founders and their early investors and could provide a huge boost to early stage equity investing in and of itself.

However, the discussion continued with Mark saying:
There should be a way for more of our money to go into something great.

He continued by saying that what we really need to do is "create a different kind of market."  Not the NASDAQ or the NYSE, but a market focused on providing liquidity to early stage companies.  The discussion moved on to the well-documented death of the boutique investment banks that led the IPO boom of the late 90s.  But his point is well taken, the existing public equity markets are no longer an appealing exit for most early stage companies.  And the existing private equity markets are incredibly distorted by regulation which makes them unavailable to the vast majority of potential investors.

At this point Aaron Houghton, co-founder of iContact, made the following excellent points:
What we need to do is open up the long tail of the capital markets.  If we can do this, we will turn everyone back into an investor.

This is exactly right -- the long tail of the capital markets (most retail investors) are only permitted to invest in pubic equities.  And public equities is not where the real innovation and growth are happening in our country.

One final note, a good friend -- Fred Bryant from Wealthforge -- is working on solving these issues around crowdfunding startups.  He was picked to potentially do a panel at SXSW on the subject -- you should definitely give him your votes.  Here is the link. Click Here to Read More..
 
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Dividends and Preferences by Hank Heyming is licensed under a Creative Commons Attribution 3.0 United States License.