Starting on June 16th, 2021, BCLA hosted a weekly 4-part Startup Legal Bootcamp Series with Matt Crowley, a venture lawyer at Crowley Corporate Legal Strategy. Through these events, Matt provided detailed guidance on how to successfully start, run, and grow companies. Over the course of the four sessions, we learned how to perform valuations, evaluate equity and dilution, develop co-founder relationships, and network with investors.
In week 1, Matt explained that valuations of a company go beyond the budget to also include projections of a company’s profit. We learned that profit is a company’s revenue minus expenses and that EBITDA is defined as the earnings before interest, taxes, depreciation and amortization. To perform a valuation, compare your company to similar companies and determine what the market thinks the company is worth. Finally, we learned that other valuation metrics include projected revenue, unique web visitors, and expected prescriptions per month. Matt ended this first session with the exit message of go public or get acquired!
During week 2, we dove into equity and dilution of a company. First, Matt advised not to give away all of your company’s equity. With that being said, some equity must be given away in order to grow the company. Use a capitalization table to keep track of the equity that is being given away. When giving away stock, we learned that it is common for companies to distribute stock to founders and employees. However, it is best to reserve stock for future employees, vendors, or preferred investors. When hiring employees, allow them to keep an increasing percentage of shares after each year of employment. This vesting strategy helps to keep your employees around long-term!
In week 3, the series looked at co-founder relationships when running a company. Having partners has its pros and cons. Some advantages to having partners include spreading the cost and workload, allowing for multitasking within the work day, and fostering a supportive network. However, you would have to share the business profits with a partner, and there may also be difficult group decisions and strains on relationships. When selecting a co-founder, remember that it is not a legal title. Legal titles within the company include CEO, CSO, CTO, etc. Rather, when selecting a co-founder, look for an individual who possesses the ability to do good work, has the right background experience, understands cash flow issues, and has a strong network. We also learned that it is important to establish repurchase rights so the company can buy back a co-founder's stocks if they don't stay with the startup long-term.
In our final week of the Startup Legal Bootcamp Series with Matt Crowley, we focused on networking with investors. Start networking with investors as soon as you have something to show for your company such as proof of concept or a minimal viable product. Keep these networking goals in mind: pick the right networking event, set achievable goals, prepare ahead of time, arrive early and leave late, and only go to events if your next few weeks are free for follow-up meetings. Be aware of the timing of each event. For example, angel investors and venture capitalists may be more likely to attend a breakfast meeting before their work day begins. On the other hand, weeknight and weekend events may be attended by other entrepreneurs who have atypical schedules. At a networking event, target people you’ve never met and be an active listener. After one day, follow-up with the people you met and set up an informal coffee meeting. Leave your business plan at home and instead engage with the investor to learn more about them. If all goes well, you would be invited to meet with the investing team to discuss finances in depth and the proof of concept data that backs your company. Matt closed by reminding us that this process can take time and to be patient and resilient to get your business funded!
Thank you to Matt Crowley for this insightful seminar series and the attendees for joining us each week. We also thank our core sponsors Magnify at CNSI, USC Michelson Center Bridge Institute, and Bioscience LA for their continued support of BCLA.