2/22 – SSE Labs Legal Workshop with Terry Kelly
Session II kicked off Tuesday evening with a SSE Labs legal workshop on incorporation and corporate governance with Terry Kelly, a partner at Dorsey & Whitney LLP, one of the SSE Labs main sponsors. He is an expert on emerging high-technology companies with respect to venture capital financing, intellectual property law, and licensing and distribution agreements. His representative work includes close partnership with many technology companies dealing with issues such as spin-off, sale to public company, recapitalization of U.S. and foreign operations, and acquisition.
We would like to thank Terry for his expert legal advice and his generous time contribution towards mentoring our ambitious entrepreneurs. He provided insight into the initial incorporation period for startup companies and the legal structure of shareholders, directors, and officers. Also, his detailed information on the stock purchase agreement, specifically on consideration, repurchasing rights, and vesting was helpful to make sure that our companies do not hit many of the shareholding pitfalls that typically face rising startups. And always remember when starting a a company:
- Do not botch the capitalization process by selling stock too early. Selling stock too early can force a company to get releases from strangers later in their growth. Vesting is a good way to avoid this common pitfall.
- Do not publicize prototype/early product information to the general public and avoid leaks that will make a startup un-fundable. Before obtaining a patent or achieving Angel or VC funding, confidentiality will provide more worth to most companies that rely on intellectual property.
- Avoid the temptation to incorporate in states that ‘look too good’. California and Delaware are the two safest states to incorporate in for a beginning technology startup. Even though states like Nevada have lucrative offers and low starting rates, their legal infrastructure makes it harder for those states to support a quickly growing company.