Case I
PROVIDE ADVICE TO AN ENTREPRENEUR
ABOUT INTELLECTUAL PROPERTY PROTECTION
Locked
doors and a security system protect your equipment, inventory and payroll. But
what protects your business’s most valuable possessions? IP laws can protect
your trade secrets, trademarks and product design, provided you take the proper
steps. Chicago
One
reason many business owners don’t protect their intellectual property is that
they don’t recognize the value of the intangibles they own. Cenar advises
business owners to take their business plans to an experienced IP attorney and
discuss how to deal with these issues. Spending money upfront for legal help
can save a great deal later by giving you strong copyright or trademark rights,
which can deter competitors from infringing and avoid litigation later.
Once
you’ve figured out what’s worth protecting, you have to decide how to protect
it. That isn’t always obvious. Traditionally, patents prohibit others from
copying new devices and processes, while copyrights do the same for creative
endeavors such as books, music and software. In many cases, though, the
categories overlap. Likewise, trademark law now extends to such distinctive
elements as a product’s color and shape. Trade dress laws concerns how the
product is packaged and advertised. You might be able to choose what kind of
protection to seek.
For
instance, one of Welsh & Katz’s clients is Ty Inc., maker of plush toys.
Before launching the Beanie Baby line, Cenar explains, the owners brought in
business and marketing plans to discuss IP issues. The plan was for a limited
number of toys in a variety of styles, and no advertising except word-of-mouth.
Getting a patent on a plush toy might have been impossible and would have taken
several years, too long for easily copied toys. Trademark and trade dress
protection wouldn’t help much, because the company planned a variety of styles.
But copyrights are available for sculptural art, and they’re inexpensive and
easy to obtain. The company chose to register copyrights and defend them
vigorously. Cenar’s firm has fended off numerous knockoffs.
That’s
the next step: monitoring the market-place for knockoffs and trademark
infringement, and taking increasingly firm steps to enforce your rights.
Efforts typically begin with a letter of warning and could end with a
court-ordered cease-and-desist order or even an award of damages. “If you don’t
take the time to enforce [your trademark], it becomes a very weak mark,” Cenar
says. But a strong mark deters infringement, wins lawsuits and gets people to
settle early.” Sleep on your rights, and you’’’ lose them. Be proactive, and
you’ll protect them – and save money in the long run.
An inventor with a newly invented
technology comes to you for advice on the following matters:
Questions:
1. In running this new venture, I need to
invest al available resources in producing the products and attracting
customers. How important is it for me to divert money from those efforts to
protect my intellectual property?
2. I have sufficient resources to obtain
intellectual property protection, but how effective is that protection without
a large stock of resources to invest in going after those that infringe on my
rights? If I do not have the resources to defend a patent, is it worth
obtaining one in the first place?
3. Are there circumstances when it is
better for me not to be an innovator but rather produce “knock-offs” of other
innovations?
Case II
Provide advice to an entrepreneur
about firing employees
Firing
an employee is a messy business. Just the thought of having to recruit, train
and manage a new sales soul is enough to keep some sales managers from
following through with the task. But holding on to a salesperson who’s not
performing or who’s disruptive to the team is guaranteed to exacerbate matters
down the road. But how do you know when it’s time to say “you’ve gotta go”? It’s
simple, according to Tricia Timkin: “Lack of production, lack of production,
lack of production,” says the president of Padigent, a Carol Stream, Illinois
Dave
Anderson, president of Dave Anderson’s Learn to Lead, concurs that performance
is one criterion for firing. Anderson, whose Los Altos , California
You
may fear firing a rep will cause a morale dip in the troops. After all,
someone’s buddy is getting shown the door. But making a tough choice can
bolster the spirits of your sales squad. Says Tamkin: “Firing can positively
affect morale [because] it sends a message that the company will take strong
measures to ensure the success of the organization. Poor performers lower the
morale of the team, and they continually break momentum and diminish the
credibility of the sales manager.”
Before
firing, however, steps must be taken to legally protect your business. It’s
crucial that the employee has been warned in advance in writing. Coaching
sessions with failing sales people will help protect you when it comes time to
separate. Tamkin advises that documentation must be developed in advance of the
firing, and that when it comes time for the employee to go, the manger should
conduct an exit interview. Though firing will never be a savory part of a
manager’s job description, it’s short – term pain for long – term gain.
“Managers have to realize that when they keep the wrong person,” Anderson
Here
are some firing guidelines from William Skip Miller’s ProActive Sales
Management (AMACOM):
1.
Never in your office: if it’s your office,
you can’t leave if the employee wants to stay and talk.
2.
Short and Sweet: As you walk in the door,
say, “The reason I’m here is to tell this is your last day of employment with
this company.” Just get it out.
3.
Never on a Friday: If fired on a Friday,
the employee can’t start the process of feeling good. All he or she can do is
stew about it over the weekend.
4.
Outside help: If the employee says he or
she has consulted an attorney or other legal counsel, stop the conversation
immediately and consult your HR department or attorney, whoever helped you
draft your company policy.
5.
No hanging around: Personal effects can be
retrieved, but have the person leave the building.
Advice
to an entrepreneur:
An
entrepreneur, whose business has stopped growing, has read the above article
and comes to you for advice:
1. Gee, these managers discussed in the
article are a bit rough. Even if one particular person is not producing as
expected, doesn’t this person still deserve to be treated with respect?
2. It appears that the automatic
assumption is that the employee is at fault for not performing and therefore
should be fired. But shouldn’t the responsibility fall on me as the manager and
the system that I have introduced? Maybe the person is performing as well as
the situation allows?
3. How am I to build team spirit within
my small company when I single out one person for lack of production and fire
him or her?
Case III
Provide advice to an entrepreneur
about small business investment companies
It
started out as a straightforward consulting project for Mahendra Vora and
research partner Sundar Kadaya. They were analyzing software trends and
perusing market research studies to assess the size of various software
markets. But after spending 40 hours looking for information that should have
taken 10 minutes to access, the pair concluded that more advanced tools were
needed to search the internet and databases of public information. Within
months, they launched Intelliseek Inc., providing software to capture, track
and analyze information for use in strategic planning, market research, product
development and brand marketing. Vora, 39, was no stranger to start-ups. By the
time he co-founded Intelliseek in 1997, he already had three business launches
under his belt. He sold all three to Fortune 500 firms, providing capital for
Intelliseek. His initial investment of a few million dollars supported
operations the first couple of years and through two major product launches.
By
1999, the Cincinnati Company was laying the groundwork for its first round of
venture capital.Vora had had two years to contemplate his dream investor.
Foremost, size did matter: The venture capitalist should have the wherewithal
for ongoing financing, but not be so large that it shunned all but elaborate
business models. Finding an investor with a broad network of investing partners
also was important to the $10million company. “If you become wildly successful
and plan to raise $50 million someday, then [the investor] should have access
to the big investors. The network is also important because it can [introduce]
you to customers,” says Vora, whose clients include CBS, Ford Motor Co. and
Nokia. Finally, Vora was looking for operational experience. “A lot of VCs are
phenomenal in advising you about what to do, but they’ve never done it
themselves,” he observes. Vora ultimately found his venture match in Cincinnati-based
River Cities Capital Funds, a small business investment company. While River
Cities was not large, it was well-connected and managed by industry veterans
with extensive professional experience.
Starting Small
Licensed
and regulated by the SBA, SBICs are generally organized and operated like any
other venture capital fund. But unlike traditional funds, SBICs use their own
capital and long-term loans to small companies. On the whole, SBICs tend to be
more risk-tolerant than banks or traditional venture capitalists….Inteliseek’s SBIC
banker removed barriers to reaching larger, mainstream investors. Led by river
cities capital funds, the initial $6 million investment included capital from
the venture arm of Nokia; later investors included Ford Motor Co. and General
Atlantic Partners LLC. “once you get a VC like River Cities, it is much easier
to get access to bigger VCs,” says Vora. “They can go to VCs and say ‘One of
our companies is doing so well, we’re going to put in more money, and you guys
should come in’.”
Down But Not Out
SBICs
invested roughly $2.8 billion in about 2,100 companies in the 12-month period
ending September 30, 2002 down from $4.6 billion invested in 2,254 companies in
the same period one year earlier. Like mainstream investors, they have had to
adjust to deteriorating economic conditions. “Valuations have come down on deals, and due
diligence periods have increased,” says Patrick Hamner, vice resident of
Capital Southwest Corp., a Dallas-based SBIC. “People are being far more
discriminating in how they invest their capital.”
“The
bar has been raised even more for small businesses trying to get capital,” he
continues. “As opposed to the overall venture industry, which has had a very
marked decline in financing activity, SBICs are down but still active.”
Nor
has quality been an overriding concern, even as SBICs engage in riskier deals
than their mainstream counterparts. “Part of what has happened with the bursting
of the bubble is that the ideas being proposed are based on more substantive
models,” says Edwin Robinson, managing director of River Cities Capital Funds.
“A lot of the excess is being wrung out the system.” While the venture shakeup
has impacted conventional the way some SBICs operate. “During the bubble years,
there was probably more of an inclination to overfund,” says NASBICs Mercer. “I
don’t mean in the sense that money might
not be justified, but to make the unconditional investment. I suspect that what
you’re seeing now is a lot more investing on a milestone basis.” For instance,
a company that requires $3 million over three years is likely to receive $1
million upfront, getting the rest after meeting revenue and growth targets.
Fewer venture dollars, coupled with the banking industry’s reticence to lend to
small businesses, has contributed to an overall capital shortage, adds Mercer. “Banks
that had been out a little bit further on the risk curve than they probably
normally do,” he says. “The banks’ own proclivity and the regulators kind of
forced a pullback, so there has been a tremendous pullback in bank credit
availability even for small businesses that have had long time banking relationships.”
The
SBIC program, meanwhile, is attracting mainstream investors having difficulty
raising capital for venture-backed investments. The increased interest bodes
well for the small firms that SBICs target: companies with a net worth of less
than $18 million and average after-tax earning of less than $6 million for the
past two years.
Advice to an entrepreneur
An entrepreneur, who is an
owner manager of a small business and looking to raise $4,00,000, has read the
above article and comes to you for advice:
1. What are the advantages of going to an
SBIC over and above a business angle or venture capitalist?
2. What are the disadvantages and how can
they be minimized?
Case IV
PROVIDE ADVICE TO AN ENTREPRENEUR
ABOUT NONTRADITIONAL FINANCING
When
Lissa D’Aquanni created a gourmet chocolate business in her Albany , New York
Her
ability to leverage local resources would be invaluable as she made her
business a fixture of her Albany
Check
out D’Aquanni’s unorthodox and creative financing plan: An economic development
group, the Albany Local Development Corp., loaned her $95,000 to buy the
building. D’Aquanni obtained a $1,00,000 government guaranteed loan from a
local credit union to renovate the structure. Façade improvements were funded
through a matching grant program to encourage commercial development in Albany
Conventional
financing wasn’t an option. “I was looking at a business that did about $44,000
in sales doing a $260,000 project, and the traditional funders were
apprehensive,” explains D’Aquanni, 37. They urged her to rent a storefront
rather than buy the rundown building. Undeterred, D’Aquanni met with a
neighborhood group to develop her expansion plan. It wasn’t the first time the
community had helped out. In 1999, the cashstrapped chocolatier needed molds
and a temperer for the Christmas rush. Recalling a strategy she had seen in a
magazine, she sold discounted gift certificates to raise capital. D’Aquanni
offered customers $25 in free chocolates for every $100 in gift certificates
purchase. “A lot of folks mailed them as gifts to friends, family and
co-workers,” D’Aquanni says. “ And most of those people ordered chocolates. My
customer base expanded.”
Indeed,
many entrepreneurs successfully launch a business only to encounter funding
hardships as they attempt to grow. The ability to think outside the box,
experts say, is critical for firms short on funding. “There are pockets of
money out there, whether it be municipalities, counties, chambers of commerce,”
says Bill Brigham, Director of the Small
Business Development
Center in Albany
Advice to an entrepreneur
An entrepreneur, who is looking to
expand but has limited access to traditional financing, has read the above
article and comes to you for advice:
1. I want to find a little pot of gold
like Lissa D’Aquanni. Where should I look?
2. I like the gift certificate idea to
raise money and build my business. What other types of products do you think
that approach will work for?
3. Over the years I have paid a lot of
taxes. Should I feel guilty for accessing government – subsidized monies to
build my business, or should I feel justified?
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