Is an IPO the Right Thing for Your Company?
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by David W. Dabbs, Robinson, Bradshaw Hinson, P.A.
You just spent the last five years of your life working virtually 24/7/365 to build your company into one of the most respected firms in its field. Three years ago you barely could raise enough money to fund payroll and rent. Now you barely have enough time to run your business because of all the meetings with investment banking firms that want to talk about taking your company public. You hear rumors about competitors going public, and your outside investors and board members tell you to strike while the iron is hot.
You wonder what it would be like to run a public company and how it will affect your lifestyle. Based on the valuation ranges under discussion, your net worth (on paper at least) makes you feel like you just won the lottery. Serious people are saying that you could be the “next Google,” and you wonder what that would be like. You imagine yourself ringing the bell on the New York Stock Exchange.
You decide to have dinner with an old college friend, who is the chief financial officer of a public company, to share your news (against the advice of counsel). What she says makes you think.
You ask her how much stock you should sell in your IPO, and she tells you that you will be told not to sell any stock. You wonder why, especially given that your private equity investor plans to sell part of its investment, and she tells you that public investors will view the sale of stock by you as a sign that you do not believe in the future of your own company. You ask her why the same rules don’t apply to your outside investor, and she laughs and tells you that they just don’t.
The Benefits and Limits of Non-Disclosure Agreements
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by Matthew S. Churchill, Robinson, Bradshaw Hinson, P.A.
The last few articles in the Bench to Market series discussed capital raises and licensing-out arrangements that facilitate an entrepreneur’s commercialization of a new product or process. To obtain capital or a licensing arrangement, an entrepreneur must often share a business plan and confidential information about the proposed product or process with potential investors or licensees. The entrepreneur should insist upon binding non-disclosure agreements that prohibit both the disclosure and misuse of such information, before disclosing any such valuable information.
While some inventors may hold intellectual property rights, such as patents, to protect their proprietary information, many entrepreneurs rely on trade secret protection early in the commercialization process. See our recent article, “Can You Keep a Secret?” Non-disclosure agreements are fundamental to trade secret protection, as they demonstrate that inventors have taken reasonable steps to hold their valuable proprietary information in confidence.
Raising Private Capital
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by Mark O. Henry, Robinson, Bradshaw & Hinson, P.A.
Last week in the Bench to Market series, we discussed the license-out business model as an alternative to raising capital for the commercialization process. Because the business idea is “your baby,” however, you are likely reluctant to let go of it so early in its journey. Instead, you may prefer the challenge of finding the money to bring your idea to market yourself.
We discussed earlier in this series the government funding that may be available for science and technology related research. Unfortunately, this source of funding does not pay for the expenses of commercialization. Thus, once you have maxed out your credit cards and fully drawn the home equity line your spouse warned you not to set up in the first place, you are likely to turn to the private sector to raise capital.
The License-Out as a Business Model
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by Steve Newmark, Robinson, Bradshaw & Hinson, P.A.
The drive to create something new and useful is an almost universal trait of entrepreneurs. This passion, however, is not always accompanied by the same enthusiasm for managing the more mundane tasks of taking an idea from a research lab or academia and making it available in the marketplace. In addition to the fundamental need to raise capital, the commercialization process requires a number of time-consuming and less glamorous steps, such as forming a company, hiring employees, establishing accounting systems, drafting contracts, securing appropriate facilities and, if all goes well, marketing and selling products and services. The process can often be frustrating, difficult and even infuriating at times, particularly for scientists or researchers. So, what can an entrepreneur, who wants to maintain her day job as a professor, physician or other professional but doesn’t want her valuable innovation to sit idle, do?
What’s the Deal: Establishing the Ownership, Management, and Other Key Terms of the Business
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by David Miller, Robinson, Bradshaw & Hinson, P.A.
We discussed earlier in the Bench to Market series the selection and formation of the legal entity that will own the technology and carry on the business of the founders. In connection with this formation and prior to engaging with investors, contractors, and others, the founders of the new business should establish clearly the terms of the venture as between themselves. They need to consider carefully and come to agreement on the ownership, management, and other important aspects of the business. Ultimately, through their discussions and with the aid of an attorney, the founders should have a set of legal documents that completes the formation of the entity, reflects clearly and with precision the terms of the venture, and prepares them to operate the business in the market without disruption. Below is a summary of key terms of the venture arrangements that the founders of any new business should establish with each other.1
Starting Out with Government Funding: SBIR and STTR Grants
This commentary in the Genomics Law Report’s ongoing series Bench to Market is contributed by Jon Jordan, Robinson, Bradshaw & Hinson, P.A.
You’ve spent months or even years researching and believe you are on the brink of a major breakthrough. Your quest to develop a marketable product or technology is at a crossroads and, like many entrepreneurs, you wonder where you can find the funds to make your dream a reality. Luckily, public funds are available from a variety of sources to help fund research and development and commercialization activities. Public grants are a valuable source of funding that can mean the difference between commercialization success and the death of an idea before it makes it off the bench.
There are currently 26 federal government agencies that offer grants in a variety of fields. In this post we will focus on the two major programs offered by the federal government for small businesses/entrepreneurs, particularly those entrepreneurs engaged in science and technology related research. These programs are the Small Business Innovation Research (“SBIR”) program and the Small Business Technology Transfer (“STTR”) program. Each of these programs is intended to stimulate technological innovation, strengthen the role of small businesses in meeting research and development (“R&D”) needs, and increase private sector commercialization of innovations derived from federal R&D.
