Friday, January 6, 2017
I recently finished my first consistent year of running since high school. To celebrate, I bought and read Once a Runner. Yes, that is how nerds like me celebrate - buy and read a book. I was asleep by 10pm on New Year's Eve.
Once a Runner is a cult classic published in 1978 and authored by a former University of Florida runner (and fellow lawyer), John Parker Jr. The novel was originally self-published, sold at running stores and out of the back of the author's car. It eventually became a New York Times Bestseller. The story follows the fictional Quenton Cassidy as he moves from a successful (but still somewhat distracted) college runner to a laser-focused, woods-dwelling hermit who increases his training to beat the best runners in the world. He does, eventually, beat one of the very best milers (in a small track meet), and then goes on to win silver in the Olympic Games.
Among the passages that struck me was the following from Quenton's time at a cocktail party, after spending months (in relative solitude) training and logging 100+ mile weeks:
What was the secret, they wanted to know; in a thousand different ways they wanted to know The Secret. And not one of them was prepared, truly prepared, to believe that it had not so much to do with chemicals and zippy mental tricks as with that most unprofound and sometimes heartrending process of removing, molecule by molecule, the very tough rubber that comprised the bottoms of his training shoes, The Trial of Miles; Miles of Trials.
Along those same lines, I recently listened to the How I Built This podcast on Angie Hicks of Angie's List. Angie stated that she was an unlikely entrepreneur - introverted, risk-adverse, and not a "big idea" person. But she credited her success to one main thing, perseverance. I am still working on how to best teach my students to persevere, and in this instant access society, more and more students are looking for The Secret to allow them to master the material (or at least get an A) with as little effort as possible. While it can be good to look for more efficient ways to do things, I also think we need to teach our students that some things of great value are only acquired through old fashioned hard work.
Friday, December 30, 2016
At the end of every semester I resolve to give less work to my students so that I don't have so much to grade. This upcoming semester I may actually keep that resolution, but I do plan to keep my blogging assignment. In each class, I provide an extra credit or required post or series of posts of between 200-500 words so that students can learn a fundamental legal skill—communicating clearly, correctly, and concisely.
If you are reading this post, then you are already a fan of legal blogs. Academics blog to get their ideas out quickly rather than waiting for the lengthy law review cycle to publicize their thoughts. Academics can also refine ideas they are incubating by blogging and receiving real time feedback from readers. Practicing lawyers blog (or should) for a slightly different reason. Blogging can enhance a lawyer’s reputation and visibility and ultimately lead to more business.
Yesterday, I met with an attorney who will speak to the students in my new course on Legal Issues for Startups, Entrepreneurs, and Small Businesses. I mentioned to him that I found his blog posts enlightening and that they filled a gap in my knowledge base. Although I practiced for almost twenty years before entering academia and had a wide range of responsibility as a deputy general counsel, I delegated a number of areas to my colleagues or outside counsel. That attorney is now part of a growing trend. In 2011, when I left practice, lawyers rarely blogged and few utilized social media. Now, many recognize that lawyers must read legal blogs to keep up on breaking developments relevant to their practice. However, most lawyers understandably complain that they do not have the time to get new clients, retain their existing clients, do the actual legal work, and also blog.
Leaving blogging to the wayside is a mistake, particularly for small or newer firms. A 2016 Pew Research Center Study revealed that only 20% of people get their news from newspapers yet almost 40% rely on social media, which often provides summaries of the news curated to the consumer’s interests. The potential client base’s changing appetite for instant information in a shorter format makes blogging almost a necessity for some lawyers. Indeed, consumers believe that hiring a new lawyer is so overwhelming that some clients are now crowdsourcing. But when they receive multiple “offers” to represent them, how do/should consumers choose? Perhaps they will pick the firm with a social media presence, including a blog that highlights the firm’s expertise.
I read several blogs a day. Admittedly, I have a much longer attention span than many of our students and the lay public. I also get paid to read. Nonetheless, I consider reading blogs an essential part of my work as an academic. In prepping for my new course, I have found posts on startups and entrepreneurship particularly helpful in providing legal information as well as insight into the mindset of entrepreneurs. If I were a busy founder running a new startup, I would likely try to learn as much as possible as quickly as possible online about certain topics prior to retaining a lawyer. Some lawyers, however, don’t really know how to speak to clients without talking down to them, much less write anything “short” and free of jargon. A lawyer/blogger who wrote in a way that I could understand, without all of the legalese, would be more likely to get my business.
Thus, even though I want to grade fewer papers, I also want my students to leave my class with the critical skill of communicating complex topics to the public in digestible chunks (and in line with state bar rules on social media). Over the years, I have advised students to volunteer to update or start a blog for their internship employers. Many have told me that they enjoyed these projects and that their employers have found value in this work. This blogging practice also puts students in the position to start to blog after graduation.
I’ll end this post with a plug for my blogging colleagues who will attend AALS next week in San Francisco. I encourage you to attend some of the socioeconomic panels highlighted here. Please introduce yourself if you attend the panel next Wednesday morning at 9:50 on whistleblowers with me, Professor Bill Black of UMKC; Professor June Carbone of Minnesota; and Professor Ben Edwards of Barry. If you have an interest in the intersection between ethics and business, please swing by next Friday at 1:30 and see me and co-panelists Christopher Dillon from Gibson Dunn; Mina Kim, GC of Sunrun; Professor Eric Orts of Wharton; Professor Joseph Yockey of Iowa; Professor Brian Quinn of Boston College; Dean Gordon Smith of BYU; Professor Lori Johnson of UNLV; and Professor Anne Choike of Michigan.
If you have legal blogs you want to recommend and/or will be speaking at AALS and want to call attention to your session, feel free to comment below. Happy New Year and happy blogging.
Friday, December 16, 2016
My favorite new (to me) podcast is NPR's How I Built This. They describe the podcast as "about innovators, entrepreneurs, and idealists, and the stories behind the movements they built. Each episode is a narrative journey marked by triumphs, failures, serendipity and insight — told by the founders of some of the world's best known companies and brands."
So far, I have listened to two of the episodes: one about the Sam Adams founder Jim Koch and one about the Clif Bar co-founder Gary Erickson.
On the Sam Adams episode, I liked Jim Koch's distinction between scary and dangerous -- repelling off a mountain with an expert guide is scary but not not necessarily dangerous; walking on a snow-covered, frozen lake on a sunny day is dangerous but not necessarily scary. Jim said that his comfortable job at Boston Consulting Group was not scary, but it was dangerous in luring him away from his true calling. However, founding his own company (Sam Adams) was scary, but not really as dangerous as working for BCG. Also, it was interesting to find out that Jim Koch is a Harvard JD/MBA.
On the Clif Bar episode, though I have eaten more than my share of Clif Bars, I was surprised to learn that the bars were named for Gary's father, Clif. The Clif Bar episode also gave great insight into the emotions that can come out when deciding whether to sell your business; Gary decided not to sell to Quaker Oats at the last minute and then needed to buy-out his partner. Separately, Gary talked about the need for corporate counsel (and how a "handshake deal" with a distributor almost cost him his business), but he also noted how many attorneys are simply too expensive for small businesses.
Both entrepreneurs drew on lessons they learned during their outdoor adventure experiences. And both entrepreneurs discussed some combination of lawsuits, contracts, and regulatory challenges.
Looking forward to listening to more episodes.
Monday, October 31, 2016
My October included some signifiant tricks and a bunch of parallel treats. I will highlight but a few of each here. They illustrate, in my view, the busy mid-semester lives that law professors may have.
It was a real trick for me to give three distinct presentations in three cities (two in person and one virtually) in a two-day period early in the month. On the morning of October 6, I participated in a panel discussion at The Crowdfunding Conference in New York City (New York). That afternoon, I jumped on a plane for Little Rock (Arkansas), where I gave a continuing legal education presentation on crowdfunding for the Arkansas Bar Association as part of a program on "Capital Raising Today and Securities Law Issues." Finally, later that day, I was Skyped into a the North Carolina Law Review 2016 annual symposium in Chapel Hill (North Carolina) on "The Role of Law in Entrepreneurship," at which I presented a draft paper, forthcoming in the North Carolina Law Review, on the important role of business finance lawyers in entrepreneurial enterprise.
It then was a trick to refocus my energy on faculty hiring a few days later. That next week, I jetted off to Washington (DC) with my fellow Appointments Committee members and our Dean and Associate Dean for Academic Affairs for a UT Law alumni reception and the Association of American Law Schools (AALS) 2016 Faculty Recruitment Conference. We were successful in interviewing a variety of folks for our two business law openings--one in the clinic and one in the doctrinal faculty.
After only a few nights home in my own bed, it was (again) a trick to haul my body into the car to drive to Lexington (Virginia) to participate in and attend the Washington and Lee Law Review's 2016 Lara D. Gass Annual Symposium, an event focusing on "Corporate Law, Governance, and Purpose: A Tribute to the Scholarship of Lyman Johnson and David Millon." At that symposium, my presentation addressed shareholder wealth maximization as a function of firm-level corporate governance. My essay on that topic will be published in a forthcoming issue of the Washington and Lee Law Review.
Before the next week was out, I accomplished yet another trick. I drove up to Louisville (Kentucky) to offer my thoughts on current securities litigation issues for the Kentucky Bar Association 2016 Securities Law Conference. I was asked to cover insider trading and liability under federal and state securities laws. In fulfillment of this charge, I delivered a presentation entitled "Where There’s a Securities Market, There’s Fraud (and Other Misconduct): Hot Topics in Federal Securities Litigation."
My final October trick? Fitting in my Business Associations oral midterm examinations and my Monday and Wednesday class meetings for Business Associations and Corporate Finance with all these trips.
All of that effort was an investment, however. The trips, presentations, and other interactions all yielded multiple benefits. Most of them may be obvious, but I will list a few in any case.
- I met lots of new and interesting folks from the crowdfunding industry, local bar associations, the AALS applicant pool, and the law academy (from the United States and abroad).
- I got great feedback on my current work and new ideas, research avenues, and citation sources for my ongoing work.
- I was able to honor two amazing colleagues, Lyman Johnson and David Millon.
- I participated meaningfully in the important task of recruiting new faculty to UT Law.
- I squeezed in some important family and personal time around the edges, including in attending the Knoxville Brewers Jam with my hubby (the tickets having been part of my anniversary gift to him back in August).
I am grateful for safe travels throughout the month. Having said that, I admit that I am relieved all that travel and activity is over and done. I look forward to a more calm November and a fun holiday season to follow. In the mean time, however, I will continue to enjoy the fall, with pumpkins being among my favorite hallmarks of the season.
Monday, August 22, 2016
We are now more than three months into the Title III crowdfunding experiment. I have been wanting to get back to posting on Title III crowdfunding since my "LIVE" post back in May, but so much other fun stuff has been going on! So, to make me feel a bit better on that point, I will share some current crowdfunding data with you all in this post based on publicly available information obtained from a Westlaw search performed yesterday (Sunday, August 21, 2016). [Note to the powers that be at the SEC: EDGAR makes it hard to find the aggregated set of Form C filings unless you are collecting data on an ongoing basis. I hope that changes as EDGAR continues to improve . . . .]
At the outset, I will note that others have offered their own reports on Title III crowdfunding since I last posted (including here, here, and here). These reports offer some nice summaries. This post offers a less comprehensive data dump focusing in on completed offerings and withdrawn offerings. At the end, I offer some limited observations from the information provided here about crowdfunding as a small-business capital-raising alternative, the need for EDGAR adjustments, inferences about the success of Title III crowdfunded offerings, and platform disclosure about withdrawn offerings.
First, however, the top-level Westlaw-based summary:
Total Form C filings: 85 (275 filings show on Westlaw, but only 85 are non-exhibit filings representing distinct offerings)
Total Form C/A filings (amendments, including exhibit filings): 153
Total Form C-U filings (updates): 4
Total Form C-W filings (withdrawals): 2
The remainder of this post takes a shallow dive into the updates and withdrawals. Filings in each case are presented in reverse chronological order by filing date. All referenced dates are in 2016. Issuer names are copied from filings and may not be the actual legal names of the entities.
Saturday, June 11, 2016
A colleague sent me a link to a White House blog post focusing on Title III of the Jumpstart Our Business Startups Act (JOBS Act), known as the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act (CROWDFUND Act). The main theme of the blog post, entitled The Promise of Crowdfunding and American Innovation, is stated in its summary: ''Crowdfunding' rule makes it possible for entrepreneurs across the country to raise small-dollar investments from ordinary Americans." This much is true. And the post accurately notes that "previous forms of crowdfunding" also already did this.
But the post goes on to extol the virtues of the CROWDFUND Act, which offers (among other things) a registration exemption for investment (or securities) crowdfunding--a very special type of crowdfunding involving the offer or sale of debt, equity, investment contracts, or other securities. Or at least the blog post tries to extol the virtues of the CROWDFUND Act. I am not buying it. In fact, the post doesn't come up with much of substance to praise . . . .
The coauthors focus a key paragraph on explaining why the CROWDFUND Act is heavy on investor protection provisions. But they do not talk about the costs of the legislation in relation to its potential benefits, except in the most superficial way--mentioning "risks" without classifying them and outlining the "multiple layers of investor protections." Although it was written before the final Securities and Exchange Commission rules were adopted under the CROWDFUND Act, my article for the Kentucky Law Journal offers a more detailed picture of benefits and costs and shares my view that the costs are likely to outweigh the benefits for many market participants.
Maybe sensing this (and the possible lack of success of the CROWDFUND Act that may result from this imbalance), the coauthors of the White House blog post offer the following:
One encouraging recent sign is not only the launch of many new regulated crowdfunding platforms, but also the growing ecosystem of “startups helping startups” to provide services for this new marketplace—making it easier for entrepreneurs to fulfill disclosure requirements, verify investor credentials, educate investors, and more. Over time, these new tools may increase transparency and provide strong accountability not only for “the crowd,” but also for the “family and friends” that have long served as entrepreneurs’ first source of seed capital.
This is a super effect of crowdfunding generally and of securities crowdfunding under the CROWDFUND Act specifically--the emergence of new services and market participants to support crowdfunding and small capital raising more generally. I predicted this in my first article on crowdfunding (co-authored with one of my former students) : "Because '[c]rowdfunding is a market of and for the participants,' some traditional financial intermediaries may be shut out of this sector of the capital formation process. No doubt, however, new support roles for crowdfunding will develop as the industry matures." [(p. 930, n.263) (citations omitted)] But these market innovations would be more pronounced, imv, if the CROWDFUND Act provided participants with a more balanced set of costs for the benefits provided. As the blog post notes, "it’s still a fact that not every entrepreneur has access to needed capital." More can be done to solve this problem with a registration exemption that allows for small capital raising--funding at well less than the $1 million level set under the CROWDFUND Act--at less cost.
The blog post concludes with more platitudes. ("America’s entrepreneurs are our engines of economic growth, innovation, and job creation . . . .") Really, this blog post is a bit of a puff piece--manifesting both good marketing (for those who read and believe it) and overoptimism.
But then again, what did I expect from a blog post put out by White House staff? I suppose, given the President's support for the CROWDFUND Act (and the JOBS Act overall--which the coauthors also praise more generally in a paragraph of the post), I should expect the White House to promote the use of the CROWDFUND Act through these kinds of public relations messages. OK. I get that. Nevertheless, I admit to being disappointed that more is not being done in the Executive Branch and elsewhere to point out the shortcomings of the CROWDFUND Act and fine tune the regulation of securities crowdfunding so that it can have its maximum positive impact on business and project innovators and investors alike. Instead, I fear that well intending proponents are over-promoting the CROWDFUND Act, which may ultimately sour folks on securities crowdfunding as a capital raising alternative if few are able to take advantage of the current regulatory exemptions. We'll see. I hope I am wrong in worrying about this. Time will tell.
Tuesday, April 26, 2016
Beer is good. It's an opinion based on serious research. A lot of beer laws are not good. They often restrict beer distribution, limits sales, and generally make it harder for us to access good beverages.
There have been some benefits of these restrictions. The main one, probably, is that it provided the storyline for Smokey and The Bandit:
Big Enos (Pat McCormick) wants to drink Coors at a truck show, but in 1977 it was illegal to sell Coors east of the Mississippi River without a permit. Truck driver Bo "Bandit" Darville (Burt Reynolds) agrees to pick up the beer in Texas and drive it to Georgia within 28 hours. When Bo picks up hitchhiker Carrie (Sally Field), he attracts the attention of Sheriff Buford T. Justice (Jackie Gleason). Angry that Carrie will not marry his son, Justice embarks on a high-speed chase after Bandit.
(Note that IMDB's description -- "The Bandit is hired on to run a tractor trailer full of beer over county lines in hot pursuit by a pesky sheriff." -- seems to have confused the film with the Dukes of Hazzard. Crossing state, not county, lines was the issue and Rosco P. Coltrane was not part of the Bandit films. I digress.)
In my home state of West Virginia, getting craft beer, until 2009, was hard. Beer with more than 6% ABV could not be sold in the state. All beer in the state is "non-intoxicating beer" but the definition was raised from 6% so that it now includes (and allows) all malt-based beverages between 0.5% and 12% ABV.
Wednesday, March 30, 2016
Some readers may be interested in the position listed below. Georgia Institute of Technology, Scheller College of Business has a strong faculty and is a recognized leader in the sustainability area.
Managing Director, Ray C. Anderson Center for Sustainable Business
(Professor of the Practice or Academic Professional)
The Scheller College of Business at the Georgia Institute of Technology in Atlanta, Georgia seeks applications or nominations for an academic appointment as the Managing Director, Ray C. Anderson Center for Sustainable Business (ACSB). The Center is part of the Scheller College of Business, which was ranked #1 in the US and #8 globally in the 2015 Corporate Knights Better World MBA Rankings. The College is a dynamic environment with a commitment to sustainability embedded in its strategic plan and faculty members across many disciplines who have sustainable business interests. The Managing Director will have the opportunity to shape and steer the growth of the Center’s activities and impact, as the Center recently received a long-term gift doubling its operational budget from the Ray C. Anderson Foundation. The Managing Director will also have the opportunity to partner with the Georgia Tech Center for Serve-Learn-Sustain (CSLS), an institute-wide undergraduate education initiative that is developing learning and co-curricular opportunities designed to help our students combine their academic and career interests with their desire to create sustainable communities.
More information follows after the break.
Friday, March 11, 2016
Some of our December graduates haven just taken the Florida bar exam. As always, I asked them about the business associations questions. Florida drastically changed its LLC rules in 2014, but still hasn’t asked any questions about LLCs, focusing instead on partnerships and corporations (at least according to the students). From a review of the released questions, the bar didn’t ask about LLCs before the amendments either.
I teach BA again next year and I’m struggling with what to emphasize. Business Associations is not required in many Florida law schools, but it is at St. Thomas, and many students enter the class with trepidation. Most will only take the one required course and won’t go on to advanced classes in securities regulation, corporate taxation, or other drafting courses. I try to focus the required BA class on skills that graduates will need in the workplace in addition to preparing them for the bar by using released test questions. Now I wonder how to balance the tension between the rise of LLCs and the many changes in laws related to securities regulation with the bar’s continued focus on partnerships and traditional corporations.
Yesterday the Obama administration added Miami to the list of tech hire jurisdictions. The Kauffman Index ranks Miami as second in the country for startups. Last month, a blogger highlighted my city’s proximity to Latin America and our emerging tech scene. With these realities in mind, should I add even more to what I already teach about legal issues that entrepreneurs and startups face even if that’s not what the Florida bar tests? I never want to “teach to the test” but I also want to make sure that I am responsible in my pedagogy, which for me includes marking up operating agreements, spending time demystifying IPO filings, and introducing them to hybrid entities that entrepreneurs ask about.
Unlike 20 other states, Florida has not adopted the Uniform Bar Exam, but I believe that any test that asks students to do the kind of critical analysis they would have to do in practice is a good thing. This week the Florida bar established a new committee to consider the issue, but I don’t have high hopes for a quick change to the bar exam. Lawyers here recently killed a proposal for reciprocity, and some see the UBE as a back door effort to flood Florida with out of staters.
So I have a conflict. How do other professors tackle the coverage issue? Comment below or feel free to email me at firstname.lastname@example.org.
Friday, January 22, 2016
Two weeks ago I posted about whether small businesses, start ups, and entrepreneurs should consider corporate social responsibility as part of their business (outside of the benefit corporation context). Definitions of CSR vary but for the purpose of this post, I will adopt the US government’s description as:
entail[ing] conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm … a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.
During my presentation at USASBE, I admitted my cynical thoughts about some aspects of CSR, discussed the halo effect, and pointed out some statistics from various sources about consumer attitudes. For example:
- Over 66% of people say they will pay more for products from a company with “good values”
- 66% of survey respondents indicated that their perception of company’s CEO affected their perception of the company
- 90% of US consumers would switch brands to one associated with a cause, assuming comparable price and quality
- 26% want more eco-friendly products
- 10% purchased eco-friendly products
- 45% are influenced by commitment to the environment
- 43% are influenced by commitment to social values and community
- Those with incomes of 20k or less are 5% more willing to pay more than those with incomes of $50k or more
- Consumers in developed markets are less willing to pay more for sustainable products than those in Latin America, Asia, the Middle East, and Africa. The study’s author opined that those underdeveloped markets see the effects of poor labor and environmental practices first hand
- 75% of millennial respondents, 72% of generation Z (age 20 and younger) and 51% of Baby Boomers are willing to pay more for sustainable products
- More than one out of every six dollars under professional management in the United States—$6.57 trillion or more—is invested according to socially-responsible investment strategies.
- 64% of large companies increased corporate giving from between 2010 and 2013.
- Among large companies giving at least 10% more since 2010, median revenues increased by 11% while revenues fell 3% for all other companies
From marketing and recruiting perspectives, these are compelling statistics. But from a bottom line perspective, does a company with lean margins have the luxury to implement sustainable business practices? Next week I will post about CSR in larger companies and the role that small suppliers play in global value chains. This leaves some small businesses without a choice but to consider changing their practices. In addition, in some ways, using some CSR concepts factors into enterprise risk management, which companies of all size need to consider.
January 22, 2016 in Business Associations, Corporate Governance, Corporations, CSR, Current Affairs, Entrepreneurship, Ethics, Management, Marcia Narine Weldon, Nonprofits, Research/Scholarhip, Social Enterprise | Permalink | Comments (1)
Friday, December 11, 2015
Amazon Prime Now has debuted in Nashville. Amazon Prime Now offers free two-hour delivery on many items for Prime members. The service is amazing and is already changing the way I shop. I really dislike shopping malls, especially during the busy holiday season, but I also dislike waiting weeks (or even days) for shipments to arrive, so Amazon Prime Now is a perfect solution.
With Amazon Prime Now expanding, I imagine even more brick and mortar retailers will be headed to bankruptcy unless they find a way to differentiate their companies and add more value.
Brick and mortar retailers may find differentiation through community building services. I already see some retailers attempting this. Running footwear and apparel stores are offering free group runs starting from their storefronts and/or group training programs for a fee. Grocery stores are offering group cooking classes. Book stores are offering book clubs. The list goes on.
These brick and mortar retailers are finding it more and more difficult to compete with e-retailers on price and convenience. With the rise in technology, however, face to face community seems to be increasingly rare. Brick and mortar retailers that aid in community building may be able to justify higher prices for their goods, and the fee-based training programs may add another solid revenue stream.
Similarly, in my classes, I consistently ask myself: How am I providing value beyond what students could receive from an online course? I have made changes (like more group work, more case method work, more writing-based assessments, and more face to face advising) in response to this question, and I continue to look for ways to improve. Adapt or die.
Friday, December 4, 2015
Earlier this week, my co-blogger Josh Fershee authored an interesting post about the surprising crowdfunding success of the PicoBrew "Keurig for Beer.” After reading Josh’s post and the embedded links, I have to agree with him; I have no idea how they raised $1.4M for a product that I don’t see being that useful. The product appears to be both overly expensive and overly time-consuming.
I think many venture capitalists would join Josh and me in questioning the wisdom of PicoBrew, at least before it raised $1.4M. But as I wrote in an earlier post, crowdfunding may help overcome biases of venture capitalists. In the days since Josh’s posts, I have heard a few people talk about how excited they were about PicoBrew. These people were all at least 10 years younger than Josh, me, and most venture capitalists. While us “older folks” may not see a use for the product, judging from the crowdfunding results and a little anecdotal evidence here in Nashville, there appears to be significant market demand for PicoBrew. Similarly, on the show Shark Tank, the female “sharks” have accused their male counterparts of largely avoiding companies with products aimed at women; and while I have not run the numbers, it does seem like the sharks' investments skew toward products that they (or maybe their family members) would use. Very few venture capitalists are under 30 years old, so perhaps products aimed at younger people got passed on more often than they should have before online crowdfunding became popular. Of course, crowdfunding can have a dark side as well; crowdfunding may be used not only to uncover good products that were passed over, but could also be used to lure more gullible funders.
Somewhat related, the Chronicle of Higher Education recently ran an article entitled “When Recruiting Teenagers, Don't Forget to Question Your Assumptions.” The article is focused on undergraduate recruiting practices and challenges readers to question conventional wisdom. The article notes a disconnect between what universities think applicants want and what applicants say they want. For example, “[a]lthough 30 percent of admissions officials said social media was the most effective way for a college to engage students who had never heard of it, just 4 percent of students said the same. . . . And while 64 percent of admissions officials said a college’s official social-media accounts were important to prospective students after applying, only 18 percent of teenagers said the same.” The article’s main directive appears to be, don’t assume what prospective students want, ask them and use evidence to craft your recruitment programs. Using evidence rather than hunches to make decisions may be obvious to professors, but I wonder how many schools use sophisticated studies in designing their recruiting programs.
Like all of us, venture capitalists and university recruiting staff members have blind spots. Perhaps evidence, from crowdfunding and student surveys, can help these respective groups shrink those blind spots.
Friday, November 20, 2015
This past Sunday afternoon, I attended a screening of the film Poverty, Inc.
The trailer is available here.
I share a few, somewhat disconnected, thoughts on Poverty, Inc. under the page break.
Friday, October 16, 2015
Recently, a number of the sports media outlets, including ESPN, the Pac-12 Network, and Fox Sports featured a company called Oculus that makes virtual reality headsets used by Stanford University quarterback Kevin Hogan, among other players, to prepare for games.
In 2012, Oculus raised about $2.4 million from roughly 9,500 people via crowdfunding website Kickstarter. Following this extremely successful crowdfunding campaign, Oculus attracted over $90 million in venture capital investment. In mid-2014, Facebook acquired Oculus for a cool $2 billion.
Oculus is only one example, but it caused me to wonder how many companies are using crowdfunding to attract venture capital, and, if so, whether that strategy is working. This study claims that 9.5% of hardware companies with Kickstarter or Indigogo campaigns that raised over $100,000 went on to attract venture capital. Without a control group, however, it is a bit difficult to tell whether this is a significantly higher percentage than would have been able to attract venture capital money without the big crowdfunding raises.
If I were a venture capitalist (and I was raised by one, so I have some insight), I would see a big crowdfunding raise as potentially useful evidence regarding public support for the company and/or product demand. Crowdfunding, in some cases, might also be a helpful check on venture capitalist groupthink and biases.
As a venture capitalist, however, the type of crowdfunding used would matter to me. In most cases, I imagine I would see a large gift-based or rewards-based crowdfunding raise as a significant positive. Gift-based crowdfunding is essentially free money for the company, and reward-based crowdfunding usually comes with minimal costs or is simply pre-ordered product. Gift-based or rewards-based crowdfunders could create some negative press for the company when the company raises outside money, as the crowdfunders did in the Oculus case (see here and here), but that seems like a relatively small problem in most cases.
In contrast, the costs and risks associated with equity crowdfunding, in the states it is currently allowed, would raise at least a yellow flag for me. Equity crowdfunding comes with so many strings attached to various small shareholders that I could see it scaring off venture capitalists. The administrative headache, plus the risk of multiple lawsuits from uninformed investors seems significant. In addition, owners who have engaged in equity crowdfunding have a smaller percentage of equity in their hands and may have raised the crowdfunded money at an unattractive valuation.
At least two of my co-bloggers have written significant articles on crowdfunding (see, e.g., here and here), so perhaps they will weigh in on whether they have seen companies using crowdfunding as a strategy to attract venture capital, whether it is working, and whether the type of crowdfunding really matters.
Friday, October 9, 2015
My wife and I both have many close family members in South Carolina, so the recent flood has been on our minds recently.
My first thoughts are with all of those affected by the flood.
Relevant to this blog, the flood also reminds me of one of the opening passages in Conscious Capitalism by Whole Food's co-CEO John Mackey. In that passage, Mackey recalls the massive flood in Austin, TX in 1981. At that time, Whole Foods only had one store, and the flood filled that store with eight feet of water. Whole Foods had loses of $400,000 and no savings and no insurance.
Mackey notes that "there was no way for [Whole Foods] to recover with [its] own resources" and then:
- "[a] wonderfully unexpected thing happened: dozens of our customers and neighbors started showing up at the store....Over the next few weeks, dozens and dozens of our customers kept coming in to help us clean up and fix the store...It wasn't just our customers who helped us. There was an avalanche of support from our other stakeholders as well [such as suppliers extending credit and deferring payment]. . . . It is humbling to think about what would have happened if all of our stakeholders hadn't cared so much about our company then. Without a doubt, Whole Foods Market would have ceased to exist. A company that today has over $11 billion in sales annually would have died in its first year if our stakeholders hadn't loved and cared about us--and they wouldn't have loved and cared for us had we not been the kind of business we were." pgs. 5-7
I have two questions. First, what decisions lead to that sort commitment from stakeholders? Second, does this sort of commitment only attach to small businesses?
Asked another way, would Whole Foods still have that sort of stakeholder turnout today? If not, is it because they have not continued to make decisions that inspire stakeholders or simply because they have grown so large that stakeholders assume the company can fend for itself.
It is seemingly easier to make connection with a small, local business than with a large chain, but there do seem to be a few larger companies that still reach their stakeholders on an individual and personal level. Companies, of all sizes, seem to reach stakeholders through making thoughtful decisions in hiring, training, producing, and giving. Authenticity seems to be quite important, as does listening to stakeholders and taking action to address stakeholder needs.
Wednesday, September 30, 2015
I recently learned, via e-mail, that Albany Law School has a number of open positions that may interest our readers. The positions, and links to the postings, are provided below:
- Associate Dean for Strategic Initiatives and Information Systems
- Tenure-Track Position in Commercial Law
- Tenure-Track Position in Tax and Transactions Clinic
- Visiting or Contract Faculty Position-Business Transactions and Entrepreneurship
- Visiting or Contract Faculty Position-Patents/Technology Transfer, Innovation and Entrepreneurship
Wednesday, September 23, 2015
As I earlier noted, I participated in a continuing legal education program at The University of Tennessee College of Law last Friday on the basics of crowdfunding. My partners in crime for the last hour of the event were two folks from Chattanooga, Tennessee (yes, home of the famous choo choo) who have been involved in crowdfunding efforts for local businesses. One used crowdfunding to finance a change in the location of a business; the other used crowdfunding to gauge interest in his business concept and raise seed capital. They described their businesses and financing efforts in the second segment of the program (after a foundational hour on crowdfunding from me).
The business location change was for The Camp House, a coffeehouse owned and operated as part of The Mission Chattanooga, a local church. Private events, including music performances, also take place at the venue. The Camp House raised over $32,000 through a crowdfunding campaign on Causeway. Matt Busby, Director of The Camp House, educated us on donation crowdfunding through a non-profit platform.
The new business concept and capital raise was for Treetop Hideaways (a/k/a, The Treehouse Project), a business that designed, built, and rents time in a luxury treehouse. The principals raised over $34,000 on Kickstarter. One of the two men behind this project, Enoch Elwell, offered us practical information about reward crowdfunding. Enoch also told attendees about his work with local entrepreneurs through CO.LAB and CO.STARTERS.
In the last hour of the program, the three of us reflected on crowdfunding successes and failures and speculated about the future of crowdfunding (using their experiences and my research as touchstones). It was a wide-ranging discussion, filled with disparate tidbits of information on business formation, finance, and governance, as well as professional responsibility and the provision of practical, cost-sensitive legal advice. Both Matt and Enoch turned out to be great folks to talk to about business finance, choice of entity, and the role of lawyers in small business formation and operation. Their observations were thoughtful and sensible. I learned a lot from them, and participants (practitioners and students) also indicated that they learned a lot. Everyone had fun. It was pure business lawyer/law student joy on a Friday afternoon! :>)
For those who were not at the program on Friday and would have liked to have been there, all is not lost. We plan to post a recorded version of all three program segments here in a few weeks. Continuing legal education credit will be available in Tennessee for viewing the online recording, upon completion of the test provided and payment of the applicable fee.
Friday, September 18, 2015
For many businesses a good online reputation can significantly increase revenue.
Kashmir Hill, who I know from my time in NYC, has done some interesting reporting on businesses buying a good online reputation.
Earlier this week Kashmir posted the results of her undercover investigation into the problem of fake reviews, followers, and friends. When asking questions as a journalist, those selling online reviews insisted they only did real reviews on products they actually tested.
Kashmir then created a make-believe mobile karaoke business, Freakin’ Awesome Karaoke Express (a/k/a F.A.K.E), and found how easy it was to artificially inflate one's online reputation. She writes:
For $5, I could get 200 Facebook fans, or 6,000 Twitter followers, or I could get @SMExpertsBiz to tweet about the truck to the account’s 26,000 Twitter fans. A Lincoln could get me a Facebook review, a Google review, an Amazon review, or, less easily, a Yelp review.
All of this for a fake business that the reviewers had, obviously, never frequented. Some of the purchased fake reviews were surprisingly specific. In a time when many of us rely on online reviews, at least in part, this was a sobering story. It was somewhat encouraging, however, to see Yelp's recent efforts to combat fake reviews, albeit after a 2015 article by professors from Harvard Business School and Boston University showed roughly 16% of the Yelp reviews to be suspicious or fake.
Go read Kashmir's entire article, it will make you even more skeptical of reviews you read online and small businesses with tens of thousands of friends/followers.
Thursday, September 10, 2015
Transactions: The Tennessee Journal of Business Law is sponsoring a continuing legal education program on the afternoon of Friday, September 18 entitled "Crowdfunding: The Basics." If you will be in or near Knoxville at the end of next week (maybe because you're arriving early for a certain football game on Saturday night versus Western Carolina . . . ), come on over and check it out. I am presenting for the introductory session. The second session will feature entrepreneurs from two local (Chattanooga-based) crowdfunded social enterprises, and the third session will be a discussion among the three of us about successful and unsuccessful crowdfunding efforts.
I am excited to be able to participate in this program with local entrepreneurs and have the opportunity to talk to them about the future of crowdfunding. I will post important out-takes from the program in the future. I assume there will be a number of them . . . .
Friday, September 4, 2015
Babson College has posted their Global Entrepreneurship Monitor ("GEM") Reports for 2014 (one global, one for the U.S.), available here.
The reports are valuable resources and should be read in full, but below are a few, selected quotes from the executive summary of the US GEM Report.
- "The United States consistently exhibits among the highest entrepreneurship rates in the developed world. At 14% of the U.S. working age population, entrepreneurship levels edged upward in 2014 to reach the highest level in the 16 years GEM has assessed this activity. This represents approximately 24 million Americans starting or running new businesses. An additional 14 million people were estimated to be running established businesses."
- "36% of U.S. entrepreneurs operate in the business service sector, which is generally associated with knowledge and service-based businesses."
- "15% of entrepreneurs state that 25% or more of their customers come from outside the United States. This shows an increase over 11% reported in 2013, but it is still lower than 21% reported, on average, in the other innovation-driven economies."
- "29% of Americans personally know an entrepreneur; this measure has generally followed a downward path since 2001, when 43% indicated this affiliation."
- "Women’s entrepreneurship in the United States exhibits among the highest rates (11%) in the developed world."
- "The United States shows the highest rate of entrepreneurship among 55-64 year olds (11%) across the 29 developed economies surveyed by GEM in 2014."
- "20% of entrepreneurs aged 18-34 currently employ six or more people. 58% of 18-24 year olds and 46% of 25-34 year olds project six or more employees in five years. Among both younger age groups, 75% use the internet in their businesses."
At Belmont University, we have quite a number of entrepreneurial students, and I think the statistics show that entrepreneurship is a critical piece of our economy.
On the legal scholarship side, Gordon Smith (BYU Law) and others have been building the Law & Entrepreneurship field. The field continues to grow, and I hope to make it to the annual meeting of the Law and Entrepreneurship Association at some point soon.
On the legal education side, there is now a Law & Entrepreneurship LLM at Duke, and the number of related programs is growing. My colleague Mark Phillips is one of the academics advocating for the teaching of entrepreneurial skills to law students, and he shows that those entrepreneurial skills are useful to lawyers at law firms of all sizes.