How to Read and Understand a Cap Table

By Debby Winters

I have a lot of clients who ask about how to read and understand their Cap (capitalization) Table. I recently read a post that I’m going to direct you to that I think is well written and explains, with examples, not only how to read your cap table, but also how to understand it.  For those readers who are not familiar with a Cap Table, this is an actual table that “takes all of the shareholders in your business and lays out who owns what, how much each one owns, and what value is assigned to the stock they do own.”

This is what the Cap Table will look like.

As you can see each Shareholder- Founder or Investor- has a column for how much they have contributed and what % they own from that contribution. Each time a new round of investment is undergone each Shareholder has a “pre-” and a “post” column. The “pre” column tells the Shareholder her % ownership or shares as the finances stand now. The “post” column tells the Shareholder her % ownership or shares after the new round is completed.
In addition to going through the Cap Table, this post tells you how to read and understand the term sheet.
If you are interested in investment in startup companies or any company, or just understanding some of the financing behind this, check this post out for more details.

IP Provisions in Consulting Contracts – Part 4

By Debby Winters

Consulting contracts can be for work performed by an outside service provider or consultant, like market research, product design, product development, software implementation, employee benefit plan administration, and the list can go on. The consultant can begin to negotiate the consulting contract once the project proposal is accepted. Many times these contracts, as prepared by in-house counsel, are one-sided with intellectual property provisions that can be a disaster for the consultant with regards to future work. Believe me, I’ve been that in-house counsel drafting these contracts. The goal of in-house counsel is to protect your company but looking at these contracts from the consultant’s viewpoint, the contract can limit their ability to bid for and perform future work. In my last two blogs on this subject,  we looked at ownership of the work product and confidentiality provisions. This time, let’s look at the non-solicitation provisions in consulting contracts and suggests some possible approaches for workarounds.

Non-Solicitation of Employees and Contractors

Always keep in mind that much of the intellectual property used by a consulting firm resides in the brains of its personnel. Many standard services contracts prepared by large entities will contain provisions prohibiting the consultant from soliciting and hiring the employees and other contractors who work for the customer. If you think about it, this isn’t an unfair request, because your consultant client will probably be interacting with hard-to-replace, specialized customer personnel. But the same rules should apply to the consultant’s personnel, as good people are hard to find, particularly in certain specialized consulting fields, and your client’s employees and contractors should not be raided by the customer.  If the form contract contains a one-sided non-solicitation clause, propose a mutual one. If the contract lacks a non-solicitation provision, be sure to add one in favor of the consultant.

Next time we will talk about dealing with large entities that may have legal departments that you have to deal with.

 

Love all and tell the truth…living the good life

By Debby Winters

“Love all, and tell the truth” … David Lewis

This is a quotation from David Lewis of Fayetteville AR that I read in a recent interview with Jeannette Balleza Collins. The interview was done by the Arkansas Business Journal on Aug 31, 2015. The title of the article is “Jeannette Balleza Collins on the Agility of Arkansas Startups.”  For background on Jeannette go to the article, but as a quick recap:

“Jeannette Balleza Collins is the co-founder of the DeadFred genealogy photo archive…graduated from Hendrix College in Conway with a bachelor’s degree in English…served as director of The ARK Challenge in northwest Arkansas from 2011 until July 2015…worked with Jeff Amerine’s Startup Junkie…a freelance strategic consultant with Scribe Marketing, which she founded in 2004, as well as the manager of the Tonic NWA Fund, an angel investment fund she co-founded.”

The quotation, as Jeannette explains, came from the CEO Forum that she attended, and in which David Lewis, a respected business man in Arkansas, spoke. The interview with Jeannette is well worth reading, especially if you are interested in the startup scene, in entrepreneurship, in Arkansas, or in all three. However, the quotation is what I want to talk about in today’s blog. I usually blog about business, startups, intellectual property, contracts, or some other non emotional topic. Reading this quotation made me stop and think about how we should all take a little time out each day and think about how important love is, and how important telling the truth ALWAYS is.

David’s 6-year-old grandson lost his life at Sandy Hook Elementary School shooting.  David’s daughter, Scarlett Lewis started the Jesse Lewis Choose Love Foundation to honor her son.

I am always touched by the families of victims of violent crimes and their ability to not only move on, but to forgive. The Lewis family is a prime example of this. It would be so easy, after an experience like that, to harbor hatred, not only for the person who committed the crime, but for everyone. To be able to love after that is amazing to me. For most of us who haven’t experienced such a tragic event as a killing, even the death or a friend or a loved one is sometimes hard to bounce back.  Just imagine, if you can, if your loved one or friend was taken so suddenly, in such a tragic manner.  I recently had a best friend from my growing up years to die. That make me think about how precious life is and how we should always show our love for others. To read this today brought it all back.

I think we can take these words into our personal life as well as our business life. If only everyone would tell the truth and open their hearts to love all.  As Collins said “What a simple, straightforward compass for living the good life!”

Go live that good life!

IP Provisions in Consulting Contracts- Part 3

By Debby Winters

Consulting contracts can be for work performed by an outside service provider or consultant, like market research, product design, product development, software implementation, employee benefit plan administration, and the list can go on. The consultant can begin to negotiate the consulting contract once the project proposal is accepted. Many times these contracts, as prepared by in-house counsel, are one-sided with intellectual property provisions that can be a disaster for the consultant with regards to future work. Believe me, I’ve been that in-house counsel drafting these contracts. The goal of in-house counsel is to protect your company but looking at these contracts from the consultant’s viewpoint, the contract can limit their ability to bid for and perform future work. In my last two blogs on this subject,  we looked at ownership of the work product and confidentiality provisions. This time, let’s look at the non-compete or exclusivity provisions in consulting contracts and suggests some possible approaches for workarounds.

NonCompetition/Exclusivity

Another less direct method by which customers attempt to secure rights in intellectual property developed by consultants is through a provision on exclusivity.  If your consultant client’s new customer is Fortune 500-sized or one of the leading companies in its industry, you will often see a provision in the services contract that prohibits your client from performing similar consulting work for the customer’s competitors in the industry. Sometimes specific competitors are named, but more common are the prohibitions against working in the customer’s industry are just broadly defined.  This situation is usually both ironic (the consultant was often successful in the RFP process because it has other current and prior clients in the new customer’s industry) and problematic (the consultant was hoping to leverage the new project into winning work from other companies in the industry).

Putting aside the possible antitrust implications of these provisions, the obvious ideal result is to convince the customer to drop its exclusivity demands.  If that is not possible, given the competitive importance of the project to the customer or the consultant’s desire not to fight the issue and risk losing the work, some possible fallback strategies are to limit the exclusivity to (1) a relatively short time period (e.g., six months after project completion) and/or (2) a very specifically defined set of services and/or (3) a very specifically defined market niche.

Next time we will look at non solicitation clauses and how the contractor can limit having these in the contract.