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There is a reason why lawyers go through year of school and tests to get to the jobs that they get paid so much to do - law is a complicated beast that takes a special breed to understand all the ins and outs of it. When entrepreneurs and venture capitalists meet at the bartering table to talk over the terms of their agreement, there is often too much or too little negotiation that goes on, so here's some advice I came across that can help startup founders find the "sweet spot" for negotiations. Sponsor Matt Bartus , a Silicon Valley-based lawyer who mainly aids startups and VCs, wrote last week on his blog A View from the Valley warning entrepreneurs new to the negotiating table to not damage their relationship with their investors by over-negotiating . According to Bartus, a surplus of startup and legal advice from blogs has clogged the minds of new entrepreneurs who think they need to nit pick over every detail of a term sheet. "They sometimes feel the need to optimize every individual provision in the term sheet according to the guidelines found online," writes Bartus. "For example, a founder recently expressed his shock to me that a VC wanted an 8% non-cumulative dividend preference on the preferred stock given the historical lows of current interest rates. He didn't realize that dividends in fast growing companies are almost never paid, thus making this provision essentially irrelevant and just a relic of past practice." Bartus says that while over-negotiating and creating needless tension is a common misstep, it is just as bad to not push back enough and to accept the terms of the agreement without any discussion. When you roll over and take what they give you, you show them that you don't stand up for yourself, damaging both your credibility and the possibility of future investments. To avoid this, he provides a few suggestions for topics that are worth debating with VCs that won't necessarily damage your relationship. Of the dozens of issues that could arise between VCs and entrepreneurs, Bartus provides a list of six important issues that could be discussed during negotiations, of which three he suggests actually focusing on. These include valuation and dilution, liquidation preference, board of directors and voting provisions, founder vesting, antidilution protection, and finally, exclusivity. By knowing these important issues, you can boost your credibility with the VCs and you ensure that you can get the best results from the term sheets for you, the founder. This is exactly why hiring a lawyer with startup experience is key to doing things right. Yes, the job of the lawyer is to explain to terms to the entrepreneur so they know what they are signing up for, but mostly, that lawyer is there to take the burden of legal worries off their back. As with any position within your startup, lawyers should be chosen on merit, not based on their reputation to the founders. He recalls an issue he had when representing a VC who was dealing with a lawyer who was the father of the founder with no startup experience and who slowed the whole process down, damaging the relationship between the two parties. Just remember the real important part of a VC/entrepreneur relationship: building and growing a great product. Hire a great lawyer with startup experience and let them do the grunt legal work so as to not divert your energy and focus from your ideas and your business. For more legal resources geared at startups, check out our list compiled earlier this year . Discuss
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Avoid Legal Tussles When Negotiating With VCs
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One of the first web design books I bought was Creating Killer Web Sites , a 90s classic by David Siegel. That book was known for pushing visual style over HTML standards. It also encouraged the use of HTML hacks , for example using tables to create layouts. Siegel's techniques were basically workarounds, but they just worked in an era when building web pages was painful due to browser incompatibilities. In Siegel's latest book, Pull , he tackles the Semantic Web. Once again, Siegel plays loosely with existing web standards. Sponsor Siegel's definition of 'Semantic Web' is much broader than that of many technologists. So, just as many Web standards advocates derided Siegel's version of web design back in the 90s, will they also cry foul of his version of the Semantic Web? Pull is being positioned as a business guide to the emerging Semantic Web. It has similarities to Creating Killer Web Sites , which caught the wave of an emerging big trend of the mid-90s (web site design) and became a bestseller. Siegel is attempting to catch a second big online wave, with the Semantic Web in 2010. Siegel explains the title in the introduction: "This book describes the pull era , where customers pull everything to them on demand - products, services, information, knowledge, and advice. Much of the foundation for pulling is called the semantic web , a new way of packaging information to make it much more useful and reusable. Over the next ten to twenty years, it will change business from a lead-push model to a pull-follow model of interacting with customers." It's hard to argue against the vision that the book outlines. However for many Semantic Web proponents, the foundational technologies are Resource Description Framework (RDF), Web Ontology Language (OWL), and Extensible Markup Language (XML). These standards allow web publishers to encode meaning - semantics - into their sites. David Siegel's definition of Semantic Web is far broader. On the book's accompanying website, The Power of Pull , there is a " Semantic Web Acid Test ." It defines a semantic web business as one that has an "unambiguous" structure for its data. The book states that "some technologists feel that semantic web data must be expressed using a language called RDF," but Siegel disagrees. Instead, he believes that "simple, unambiguous formats are part of the semantic web." The book is ultimately about how structured data will change how we do business. Frankly, the use of the term 'Semantic Web' in this book feels forced. Even so, I think it's a very useful book and offers detailed scenarios of how structured data will improve business. For example, chapter 4 is about retailers and outlines the benefits of RFID tags in retail - including describing a visit Siegel made to forward-thinking German retailer Metro Group. Overall Pull is a solid and well-researched book. It's a good introduction for business people to structured data and the Semantic Web. My one issue with the book is that Siegel's appropriation of the term 'Semantic Web' leaves me feeling a little uneasy. On the home page of his personal website is a blog post (entitled 'Why I Should be Apple's Next CEO'), in which Siegel claims that he "started talking about the Semantic Web in 1998, before Tim Berners-Lee coined the term." Whether that's true or not, it does beg the question: is Siegel's definition of the Semantic Web the same as Tim Berners-Lee's? Discuss
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David Siegel: From Killer Web Sites to Semantic Web
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Last week I had the privilege of meeting Adam Greenfield, author of Everyware: The Dawning Age of Ubiquitous Computing . It's one of my favorite books about the Internet of Things and is still ahead of the curve, even though it was written in 2005 and published in 2006. Greenfield was in my city Wellington for the week, so I sat down with him at a local cafe to get his views on the current state of Internet of Things and where it's headed. If you're unsure what the world will be like when everything is connected to the Internet (hence the term 'everyware'), then read on for Greenfield's acute observations and examples of what's already happening. This will be a multi-part post, published over the course of this week. Sponsor What's Changed? Mobile Phones! Since it's been nearly 4 years since Everyware was published, I asked Greenfield how Internet of Things has evolved since that time. In particular I wanted to know if anything major had changed since the book was first released. He replied that the mobile phone has been the biggest change. According to Greenfield, the "single biggest failure of imagination in the book was that someone would decisively re-imagine what the phone is." I think he's being overly harsh on himself, as the iPhone wasn't announced until January 2007 . So in 2005/06, nobody but Steve Jobs and some of his team at Apple could have possibly imagined what the phone would turn into. It should also be noted that Adam Greenfield was a very early adopter of mobile blogging (he coined the term "moblog") and he is currently Nokia's head of design direction for user interface and services. So if the evolution of the mobile phone since 2005/06 surprised even him , that tells you something about how much of a sea change the iPhone has been. RFID One thing that hasn't changed as much as first thought is RFID. Greenfield ruefully noted that "this stuff is taking so long." There are scenarios in Everyware that haven't come to pass yet, such as RFID in credit cards and home theatres. However he thinks that RFID will eventually be usurped by superior item identification and tracking technologies. See this ReadWriteWeb post for more background on the state of RFID. The City Currently Adam Greenfield is working on his next book, called The City Is Here For You To Use . I asked him what cities he's been most impressed with, in terms of their use of Internet of Things technologies. He mentioned Korea and Singapore, noting also that municipalities in East Asia have made a lot of progress. According to Adam Greenfield, a more interesting question may be: what kind of responses are those cities getting from companies? He said that technology companies like Cisco and Intel are responding with products and services for Internet of Things. I asked Greenfield what he thought the differences were between adoption in Asia and the U.S.? He replied that public motivation in Asia may be one differentiator. In many Asian countries, there is a belief in 'progress' and a future life that will be better because of the "heroic investments" of governments and big companies. He said that quality of life can be delivered as a service in a place like Korea, for example an Internet fridge . Whereas westerners tend to question the utility of things like that. To get a wider understanding of Internet of Things, I recommend you purchase Everyware now on Amazon . Neither myself or RWW is making any commission on this, I just think this book deserves a wider audience. Stay tuned for more from Adam Greenfield in Part 2 of this series. Discuss
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Everyware: Interview with Adam Greenfield, Part 1
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