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Choosing and Working with Your Service Providers

This guide offers advice for entrepreneurs expanding into Clean Tech, operating in Silicon Valley, and needing services like financing, patent filings, and legal support from angels, VCs, attorneys, and more.

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Choosing and Working with Your Service Providers

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  1. Choosing and Working with Your Service Providers An Guide for the Entrepreneur

  2. SV Accelerator • We advise entrepreneurs and interface with investors • Enterprise and consumer software / Internet companies, looking to expand into Clean Tech • Operate out of Silicon Valley • Operational experience in management of technology • Technical expertise in in EE, CS, Mech E, Materials Science, Chemical Engineering and Biotech • Expertise in technology law (patent and transactional)

  3. (Some) Services You Need • Financing (angel, VC, credit, govt grants) • Incorporation • Contracts (investments, employee agreements) • Patents and other IP • Banking • Real estate / office infrastructure • Finance & accounting

  4. Provided By • Angels, VCs, government agencies • Attorneys (Corporate, transactional, IP) • Accountants and book keepers • Commercial bankers • Grant writers

  5. General Thoughts on Service Providers • Substantive competence • Must be selective, don’t assume reputation = competence • Ask questions regarding domain expertise • Be aware of fit • Are you an appropriate client for this firm • Size/revenue appropriate? • Goal appropriate?

  6. Service: Patent Filings • Objective: Obtain "crown jewel" protection on company's technical innovations • Whether available patent protection is narrow or broad, patent filings are usually necessary • An item on investor checklists, regardless of ultimate breadth, validity and enforceability

  7. Patent Filings: Options • Large national/international law firm • Some are $1B revenue • Morrison & Foerster • Boutique patent law firm • Weaver Austin • Solo practitioner • Many “retired” from the other types of practices

  8. Pros • Large national/international law firm • One-stop shopping • Boutique patent law firm • More technical specialists • Some work with small clients • Solo practitioner • Low cost • Usually work with small clients

  9. Cons • Large national/international law firm • Focus on litigation and other high-revenue projects • May be scale inappropriate for a startup • Boutique patent law firm • Lack of cross-disciplinary understanding (corporate, transactional) • Solo practitioner • Uneven substantive competence

  10. Patent Filings: Case Study • UC biotech faculty member • UC Office of Technology Licensing issues • Informal advice - document lack of responsiveness from OTL • Engaged large law firm to file a patent • Came to us about a year later • Complaint – not prioritizing his issues, using “last few brain cells at the end of the day”

  11. Patent Filings: Case Study • We reviewed the case, saw some substantive problems, but more important process/project management problems • Also saw inappropriate bill items based on abandonment of patent application (law firm’s fault) • Probably not dishonest, merely disorganized • Poor billing processes • Size inappropriate client, but similar problems can be seen at smaller firms

  12. Patents: Bootstrap or Angel Startup • Large national/international law firm • Generally competent, but may be too large for you • Can a specific department work effectively with you? • Don’t accept a blanket statement on this • Boutique law firm (specializing in patents) • Usually appropriate • Solo practitioner • Must have excellent recommendations

  13. Patents: VC Funded/Fundable Startup • Large national/international law firm • Make sure patent group has specific technology expertise, and quiz them on this • Boutique patent law firm • Can be a good choice, if they communicate with your corporate and transactional attorneys (billing issues) • Solo practitioner • Might actually be too small for some startups • Should have pedigree from a well-regarded firm

  14. More on Client Fit: Finance & Accounting • Clients: Five art school faculty members, teaching abroad • Service provider: Large accounting firm • Needed accounting/tax preparation while working abroad • Fee was flat rate $2K per person – not major revenue source

  15. More on Client Fit: Finance & Accounting • Clients were assigned to the most junior associates • Lacked relevant knowledge such as foreign residency tax issues • Lacked experience and authority to fix the situation, such as bringing in other team members • Clients too small for partners to care to intercede • Classic example of size inappropriate client

  16. More on Client Fit: Finance & Accounting • First failure in project management chain • Should never have taken on this client in the first place • You cannot rely on the service provider to make this decision correctly for you • Our advice, post hoc – if you care about the University’s money, demand a full refund • The firm cares little about making $10K, they will care little about writing it off

  17. Another Case Study: Trademark • Client: “Swan” baby clothing designer • Service provider: TM department at large law firm • Filed Swan trademark registration and received first rejection due to existing “Swan outerwear” • Conducted extensive legal research to distinguish trademarks • Completely cost inappropriate for small client

  18. Another Case Study: Trademark • Switching cost for large corporation is high (think Pepsi) • And large corporation has already considered this • For new, small clothing designer, switching cost is ~ 0 • Should have advised name switch, and/or TM registration for “Swan baby” clothing instead of “Swan” baby clothing, not extensive legal research • Law firm agreed to write off bill item, but why was it executed in the first place?

  19. More on Choosing and Working With Service Providers • Seek input for referrals and vetting of service providers • Once selected, ask for past and current client recommendations/feedback • Seek out service providers that are appropriate for your company and stage • As your company grows and/or its needs change, you may need to replace even a good service provider • Consider having them work with/supervise a larger service provider

  20. More on Choosing and Working With Service Providers • In all cases must be aggressive and organized about project management, don't rely on them! • Regularly monitor progress and quality of work, don’t be afraid to bring in a third-party for input • Review bills thoroughly and ask for explanations

  21. Questions? Robert H. Lee robert@SVaccel.com Deepa Ravindranath deepa@SVaccel.com +1.510.427.2049 (California)

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