Indiana Entrepreneurial Law

BUSINESS LAW – WHAT’S IN A NAME?

Thursday, August 26, 2010 by Scott Kreider

Your friendly Indianapolis attorney at Alerding Castor Hewitt LLP here with a history lesson and tie in to business law. Most of you have probably heard the term “gerrymander” and know that it refers to a process of dividing a territory into districts in order to give one political party an advantage over another by concentrating the voting strength of that party in as many districts as possible. Fewer of you probably know the origin of the term, and I imagine that even fewer know much about the man whose name spawned the term.

The term first originated in 1812 to describe a rather bizarre looking district boundary in Essex County, Massachusetts attributable to then-Governor of that state, Elbridge Gerry. Gerry had signed a bill passed by the state’s legislature to redraw districts that favored his party, the Democratic-Republicans, over the Federalists (whose influence was on the decline). Gerry would go on to be elected Vice President later that year and served under President James Madison; however, he died a couple of years later in office at the age of 70, thereby becoming the first Vice President who did not go on to become President.

Despite the notorious practice that has been associated with his name, Gerry was a Founding Father who made several contributions to the country: For example, he was a signer of both the Declaration of Independence and of the Articles of Confederation. He was also among the dissenting voices that refused to sign the Constitution because it did not contain a bill of rights. As those historians among you know, it was an agreement to create the Bill of Rights (the first ten amendments to the Constitution) that helped to secure ratification of the Constitution.

So how does this tie in to business law, and how does it relate to our business law, Saas law, entrepreneurial law, Indiana technology, and trademark clients? It illustrates how one false step can overshadow an individual’s contributions to our global community and then be forgotten to history. We at Alerding Castor Hewitt LLP know how important your name and reputation are to you; we feel the same way about our own name and reputation. It’s why we are committed to working with you at the planning stage of your business, in securing venture capital, and in helping you with your litigation needs so that you can secure and maintain that name and reputation, and the goodwill that goes with it, so that your name doesn’t get sullied and become the next “gerrymander.”

What it Takes to be a Leader

Friday, August 6, 2010 by Janet Monroe

This morning I attended the Techpoint event: What it Takes to Lead a Successful Entrepreneurial Venture Today and was reminded of some fundamental leadership qualities that I see in many of the successful business owners we work with as a business, entrepreneurial and information technology law firm.

Speaking today were Daniel DeHayes, a Professor Emeritus of Business Administration with the Indiana University Kelley School of Business and Delphia Croft, the Managing Principal of Solution Revolution Consulting.

In the studies that they have conducted collectively, they have found certain characteristics to be present in the leaders of today's successful companies. While they found several, in this session DeHayes and Croft discussed the following four traits:

Sovereign: trust in yourself, your intuition and judgment
Warrior-like: commitment to a greater cause than yourself (though not mercenary)
Open: extreme self-awareness
Intentional: possessing an intense, pro-active focus (shunning habitual thinking)

Considering these traits, I would have to agree that to be successful you must have the confidence to trust in your own capabilities, the strength to execute (while retaining the ability to quickly adapt to the unforeseeable), the humbleness to know your own strengths and weaknesses, and the determination to achieve the goals you set forth.

Successful companies don't happen on a whim, but are backed by the blood, sweat and tears of driven individuals. If you are contemplating striking it out on your own, take a moment to reflect on the above traits and decide for yourself if you have what it takes to be a leader.

As an attorney of a business, entrepreneurial and information technology law firm, it is an honor to work with our clients - those individuals who possess the leadership characteristics to build successful entrepreneurial ventures.

PURE Eatery Delivers Fresh Honest Food

Tuesday, June 22, 2010 by Janet Monroe

Today is an exciting day for Indianapolis with the establishment of a brand new local eatery called "Pure" located in Fountain Square at 1043 Virginia Avenue.

Working with the business owners through Indiana entrepreneurial law, I checked in to see what the place had to offer this afternoon. I couldn't be more excited about the fresh flavors and the funky atmosphere. With original artwork and high ceilings, it has a Chicago vibe with a menu focused on fresh honest food. Perfect.

Today I chose the asparagus salad with the Caponata flatbread panini with eggplant. Needless to say, it was delicious.

The daily specials are based on local, organic, and seasonal availability. A healthy alternative for lunch, Pure is green and supports the local economy... I could eat here everyday. Pure Eatery will definitely be on the regular rotation as one of my favorites downtown.

I'm glad to help the owners with Indiana entrepreneurial law, and excited to see this dream of theirs come to life. If you're in the area, you should stop in to see them. The food is incredible and the service even better.

Check them out at pureeatery.com

Hours:
11-7 Monday - Saturday
12-5 Sundays

Culture of Private Equity

Monday, May 3, 2010 by David Castor

In my recent blog series, Entrepreneurial Law - Developing a Good Business Model, I addressed how an entrepreneur needs to work through three prongs in order to develop a sustainable business model developed for growth: Market Opportunity; Management Team; and Capital Structure.

Private equity investors asses the same prongs when determining whether to make an investment in an emerging company, but I find that investors tend to set the prongs in their own priority ranking. I think all three must be in place, but investors always seem to have one prong that they really focus on.

Some of this is cultural based on geographic region. Take New York, Midwest and West Coast investors for example. I do a lot of work with private equity groups in each region and consistently find investors in each region to rank the prongs in levels of their own importance. Here is what I find:

New York (financial center of the world):
1.    Capital Structure
2.    Management Team
3.    Market Opportunity

West Coast (land of emerging technology businesses and venture capital):
1.    Market Opportunity
2.    Capital Structure
3.    Management Team

Indiana (my home; land of hard work and community)
1.    Management Team
2.    Market Opportunity
3.    Capital Structure

Consider this if you are looking for private investors in your business. This affects how you may address certain investors and where you look for investments.

See also:

Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
Entrepreneurial Law – Developing a Good Business Model – Part III
Entrepreneurial Law – Developing a Good Business Model – Part IV
Entrepreneurial Law – Developing a Good Business Model – Part V

The Art of Financial Projections - Filling the Money Jar

Tuesday, April 27, 2010 by Janet Monroe

venture capital law firms, Indiana entrepreneurial law

Working in the area of Indiana entrepreneurial law, I see dozens of business plans that are incorporated into the equity raise documents of budding new companies.

With those business plans are financial projections that are based on newly formed companies with limited operating histories, unproven track records, and often times plans for entry into a mature and highly competitive marketplace.

Needless to say, it can be daunting as an entrepreneur to come up with a compelling reason why investors should look twice at you and your idea.

In my experience guiding clients through this area of federal securities regulations and Indiana entrepreneurial law, I agree that there is an art to financial projections. Take it from Guy Kawasaki, the author of the Art of the Start, who wrote a chapter in his book Reality Check: The Art of Financial Projections. He suggests the following ten pointers:

Underpromise and overdeliver
Forecast from the bottom up
Don't go beyond 12 to 18 months
Reforecast every three months
Don't let costs get in front of revenue
Collaborate with your investors
Think in terms of per-unit profitability
Plan for marketing costs
Create a one-page report and stick to it
Never miss a cost projection

These bullet points are great to consider and some of the factors I keep in mind as I work with clients and their equity raises under Indiana entrepreneurial law. If you haven't read a book by Guy Kawasaki, you might want to consider it if you're an entrepreneur and seeking some guidance as a start-up company.

US Private Equity - Consider Investors Outside of State

Friday, April 2, 2010 by David Castor

I love Indianapolis, but I find it a difficult place for emerging companies to raise capital through private placement offerings. More established companies have less trouble, but earlier stage companies often are caught in a chicken/egg situation – they need capital to move to the next business stage, but private equity investors don’t want to invest until they are through that next stage.

Part of what makes Indiana so great is that we are very fiscally conservative. In fact we were one of only three States with a budget surplus in 2009. Private equity investors in Indiana seem to be willing to accept lower expected returns for lower risk investment opportunities. That does not bode well for early stage companies as seed stage and early round equity raise companies are often seen as too high risk for investment.

There are some exceptions. Gravity Ventures, for example, is a private equity fund that invests in emerging stage companies. Also, Indianapolis is home of some angel investors and angel investment groups that are true patrons for the entrepreneur and have a passion for helping early stage companies. But, we don’t have enough of these funds and investors to take care of all of the great companies that are started in this city.

This is why I travel as often as I do to California and New York – to build relationships with investors and investment groups that make investments in companies in emerging stages. Coastal investors appear more risk tolerant than Indiana investors. They are not foolish (their due diligence processes often greatly outweigh what I have seen in Indiana), but they are willing to take more investment risk in hopes for higher returns. One particular CA investor this past week was telling me about a 40x return on a 4 1/2 year exit off of a $200k investment. That is $200k to $8M in less than 5 years. Key to such a high return was the investment at the seed stage. Of course, what he is not telling me is that he hits 1 for 10 of good returns.

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Other posts that may be of interest:

A World of Private Equity
Two Types of Violations in Private Equity Offerings
Rules of Funding
Entrepreneurial Law - Proof of Concept & Proof of Scale

Check Out The Butler Accelerator

Thursday, December 24, 2009 by David Castor

Entreprenurial Law - Accelorator Program

Closing in on the end of 2009 I have to say that I am quite pleased with the commitment Indiana showed this year to be a State that supports and promotes innovation, entreprenuership and business growth.

This week I had breakfast with Larry O'Connor, Executive Director of Butler University's Business Accelerator. Larry is a former CEO of Bank One Indiana. Following his "retirement", Larry became CEO of The IndianapolisMuseumm of Art, and recently took the position to lead theAcceleratorr program.

On the program's website, Larry describes theAcceleratorr as follows:

Operationally, the Accelerator is a consulting business designed to serve middle market companies in Central Indiana. Teams of professional consultants, faculty and students work directly with these companies - helping them to grow and simultaneously providing a living laboratory in which undergraduate and MBA students learn and experience real business problems and situations.

While Butler is continuing its work with mid-market companies, 2009 also showed growth of incubator programs and the birth of new angel investment groups in Indiana. As an entrepreneurial law / private equity attorney, the health of these groups means a lot to me in terms of support and growth of my clients.

2009 was a strange year for businesses. Private capital was hard to come by due to economic constraints. Lending was tight. The corporateenvironmentt seemed to be mired by corporate fraud (Madoff, Durham). Despite all of this, Indianapolis proved to be a great place for businesses to launch and grow.

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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.

Indiana Is More Than Low Cost Housing And A Good Family Enviornment

Friday, November 20, 2009 by David Castor

There are several business blogs that I follow. Most of these are written by SaaS law / Internet law clients of mine or other Indiana businesses in technology industries. Lately I have been falling behind on them. This morning I am trying to catch up.

I came across a very good, brief video on Kristian Andersen + Associates' blog.

The video is from the Bigger Ideas/Smaller Indiana conference this past summer. In the video Kristian Andersen shares his feelings on central Indiana's business environment and our tendency to minimize our solid business culture by holding ourselves out as having two strengths to attract businesses and entrepreneurial ventures to Indiana:

#1 - Indiana has low housing costs.
#2 - Indiana is a great place to raise a family.

Don't get me wrong, these are great attributes of our region, but I agree with KA that they do not create cultural excitement or substantive value for businesses. If you look at top tier business environments, they certainly do not market themselves in this way. They sell value. They sell cultural significance. They sell networks and incentives.

Kristian, very nicely done!

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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.

Don't Drink the Kool-aid, Choose Your Partners Wisely

Tuesday, November 17, 2009 by Janet Monroe

Indiana Technology Lawyer, Indiana Technology Counsel I saw a great article awhile back in Entrepreneur and thought I should post the article for those in the formation stages of their next business venture.

I can't stress enough how much time and energy it takes to launch a start-up, and just how much the success or failure of a budding new company rests on the people involved. I see it everyday as an Indiana technology lawyer involved in Indiana entrepreneurial law.

You can count on spending hours upon hours of the day with your business partners, so consider who those people are wisely. At the very least, read this article by Scott Gerber, who is a columnist for Entrepreneur.com's Young Entrepreneur and the CEO of Gerber Entertainment.

Partnerships can turn out to be a blessing or a curse. For every thriving partnership featured in Entrepreneur, there are thousands that end up stagnant, dissolving, dysfunctional or worse--in court. More often than not, performing basic due diligence can keep you from ending up in bad partnerships. So, have you done your homework? Are you ready to trust your financial security on someone else’s personality, work ethic and business acumen? Before you drink the partner Kool-Aid, here is a list of the top ten worst business partners for your start-up--along with some tips to help you avoid this cast of characters:

Mr. Employee
Mr. Employee is a first-time entrepreneur with a pristine resume and an abundance of references. He enjoys collecting a weekly paycheck, health benefits, and eating dinner with his family nightly at 7 p.m. Unfortunately, Mr. Employee isn’t really self-sufficient and doesn’t know how to move the business forward without you instructing his every move. Plus if your investment deal doesn’t pan out soon he is going to need to find a “real job” to pay the kids’ college tuition. Tip: Risk-adverse individuals who do not share your priorities will not be productive partners. Pass up individuals who cannot commit equal time, energy and financial resources.

Mr. Perfectionist (also known as Mr. Procrastinator)
Mr. Perfectionist needs every “i” to be dotted and “t” to be crossed before he schedules an official product launch date. He enjoys researching competitors, building industry case studies and improving his 150-page business plan. Mr. Perfectionist really wanted the new business to be up-and-running by now, but still feels something isn’t quite right. He plans on putting together another comprehensive survey to send to all of his colleagues, friends and family in the next few weeks to help flesh out the concept further. Tip: A good plan today is always better than a perfect plan tomorrow. Steer clear of excuse-prone procrastinators. Seek out self-starters who run with the ball and make things happen.

Mr. College Buddy
Mr. College Buddy had a stroke of genius while out at the bar one night, wrote it on a cocktail napkin and asked you to help him “make it happen”. He enjoys bragging about his great idea and giving you directions on how to execute (he’s not into the “heavy lifting” thing). The issue: he’s moving across country to start med school in the Fall. But fear not, Mr. College Buddy will make himself available by phone when he’s not studying, working, in class or on a date. He’ll be sure to forward you the address where you can mail his 50% of the profits. Tip: Never assume all of the risk in exchange for half the reward. Ideas are worthless without proper execution. Before you bring a co-conceived idea to fruition, make certain that your partner plans to be around for the long-run. Napkins are not legally binding. Always execute an operating agreement.

Mr. Inventor
Mr. Inventor thinks he’s created the next billion-dollar widget. He enjoys giving two-hour dissertations on Chinese electrical engineering standards to investors and making business decisions based on ‘nice people’ and ‘gut feelings’. Mr. Inventor doesn’t really understand the phrase ‘in the black’, but feels it’s imperative to spend all of the company’s investment proceeds on research and development. Tip: Brilliant academics are not necessarily brilliant businessmen. In lieu of a partnership, first consider licensing deals or strategic partnerships. If you decide to go ahead with a partnership, be sure your agreements clearly distinguish the differences between product control and operational control.

Mr. Right
Mr. Right will be the first person to tell you that he is never wrong. His favorite phrase is ‘my way or the highway’. He will rarely discuss his decision making process because he views such discussions as a weakness. He enjoys demeaning partners who don’t agree with him and making decisions without telling them. Funny thing about Mr. Right: he always seems to blame everyone but himself when his plans don’t pan out. Tip: Communication is the key to a successful partnership. Find a collaborator, not a dictator. No one is always right.

Mr. Dreamer
You’ll hear Mr. Dreamer say this line a lot: “One day, when we’re millionaires…” He loves talking about retiring by 29 and how he intends to spend his hypothetical millions on a gold plated yacht that he’ll dock off the coast of his private island. One small problem with Mr. Dreamer: he doesn’t seem to know how to keep the business above water next month. Tip: Big paydays come from years of hard work and persistence, not excessive rambling and daydreaming. While it’s important your partner be both positive and optimistic, it is equally important that he or she is grounded and focused.

Mr. Spender
Mr. Spender can’t possibly survive without a six-figure salary, lavish office and an in-house cigar roller. Price is no object when it comes to entertaining a client or flying first class. If you’re lucky, Mr. Spender might even invite you to one of the extravagant dinner meetings that he charges on your company’s corporate card. Tip: There is no such thing as the unlimited checkbook. Partner with fiscally conservative, financially responsible individuals who strive to make every dollar benefit company growth and development--not their personal lifestyles.

Mr. CEO
Mr. CEO feels compelled to tell everyone that he is a CEO within 30 seconds of meeting him--even if his company is worth less than the paper on which his business card is printed. He loves cocktail receptions, his name written in fancy fonts, and stacks of luxury car magazines neatly piled on a coffee table in plain sight of customers. The only thing he doesn’t seem to like: real work. Tip: Successful companies are not built on titles, talking and toys. Keep away from selfish, egotistical individuals who want to talk the talk versus walk the walk.

Mr. Vacation
I’d tell you more about Mr. Vacation, but I don’t know much about him. He never seems to be around. Tip: No-shows are dead weight and eat away profits. Make sure that your operating agreement clearly outlines partner responsibilities and vacation days.

And the partner to avoid like the plague is…

Mr. Personal Issues
Mr. Personal Issues always has a sad story. On the same day as your company’s keynote presentation at the big conference, his son’s wisdom teeth need to be pulled and his dog died of pneumonia. He would love to attend next week’s investor meeting, but his divorce hearing might tie him up all day. Unfortunately, Mr. Personal Issues can’t afford his legal bills, so he’ll need to pull a little more money out of the company this month to avoid his ex-wife from taking 50% of his equity in the settlement. Thankfully, this will be the last time he needs money… Tip: You’re not in business to be a babysitter or a psychiatrist. Know everything there is to know about a prospective partner before you sign on the dotted line. Discuss everything from business to politics to family life to finances. If a potential partner seems to have a few screws loose, run as fast as you can in the other direction.

10 Cases Where Online Activity Came Back to Haunt III

Saturday, October 3, 2009 by David Castor

This is part III of a hilarious article by Robert Ambrogi on the IMS Expert Services blog. I am an Indiana technology lawyer focusing on entrepreneurial law, SaaS business law and technology law. As such, this article hits home as it lies at the intersection of social media and legal process. Enjoy.

4. Lawyer's blogging backfires

A California lawyer learned the hard way to watch what you say on your blog. His posts helped earn him a suspension from law practice. But the case has an unusual twist. The lawyer in the felony trial was there not as an advocate, but as a juror. Not only that, but he had not disclosed to anyone that he was a lawyer.

Even though the judge warned jurors not to discuss the case, the lawyer wrote about it on his blog. His posts identified the judge by name and described her as "a stern attentive woman with thin red hair and long, spidery fingers that as a grandkid you probably wouldn't want snapped at you." He gave the first name of the defendant and described his alleged crimes, referring to him as "a stout, unhappy man."

If the defendant was unhappy at trial, he later had reason to smile. When the lawyer's blogging came to light, the defendant's conviction was lifted and he was given a new trial. As for the blogging lawyer, he earned an 18-month suspension from the practice of law.

3. Blogging makes bad medicine

When a doctor decided to blog his own med-mal trial, it was a prescription for trouble. The doctor, known to his readers only as Flea, was already writing his blog when he was served with a lawsuit. As the case progressed, he periodically posted about it, describing his feelings when he was served with the complaint and reported on his own deposition.

When the trial finally got underway, he continued to blog, relaying his impressions of the plaintiffs' lawyer (whom he nicknamed "Carissa Lunt"), describing his "dress rehearsal," and accusing jurors of dozing off. While he may have thought his blogging had gone unnoticed by others in the courtroom, that was anything but the case.

During cross-examination of the physician, the plaintiff's attorney – the very one the doctor had described on his blog – surprised him with the question, "Are you Flea?" Yes, he sheepishly admitted. It was, according to one news account, a "Perry Mason moment."

The next morning, the parties entered into a confidential settlement reported to be "substantial." Ironically, jurors probably had no sense of the import of the question. But it was enough to signal that the plaintiffs' lawyer was prepared to delve into the blog in open court. Given some of what Flea had written there, settlement no doubt seemed the wiser course.

2. MySpace, my downfall

When an attractive New York model sued a high-profile billionaire claiming he had pressured her into sex when she was only 16, the tabloids were in a tizzy. Soon, the story was all over the gossip pages.

But it did not take long before reporters at one newspaper discovered the model's MySpace page. Based on what they found there, the newspaper reported that she was in fact a he. It also reported a graphic description taken from the MySpace page of the model's sexual fantasy involving multiple men and women. Further snooping revealed evidence that the model may have been much older than 16 at the time of the alleged affair.

After the MySpace page came to light, the model's lawsuit against the billionaire seems to have fizzled. But the model filed a second lawsuit, this time against the newspaper that discovered the page. She alleged that the newspaper's description of her fantasy defamed her by portraying her as a "promiscuous slut."

An appellate court disagreed. Because the newspaper reported only that the model had a fantasy – not that she actually engaged in the conduct – it did not defame her, the court reasoned. "The references to the Myspace pages merely served to highlight the ambiguity regarding the sexual identity of the person who sued the billionaire," the court said.

1. YouTube, Your Honor

Nothing, it seemed, could derail the nomination of Sonia Sotomayor to be the first Hispanic on the Supreme Court. Nothing, that is, but the resurrection online of her own long-forgotten words.

First it was that now-famous YouTube video. It showed a 2005 speech by Sotomayor to law students interested in becoming law clerks. The difference between serving in a trial court and in an appellate court, she told them, is that a "court of appeals is where policy is made." Conservatives jumped on the comment, saying it showed her to be a judicial activist.

As if that was not enough of a blow, next came the resurfacing of her 2001 speech, published by Berkeley's La Raza Law Journal, in which she said, "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn’t lived that life."

Fortunately for now-Justice Sotomayor, neither her comment about judicial activism nor her "wise Latina" remark was enough to derail her track to the nation's highest court. But both serve as reminders that no matter what might be at stake, in the age of social media, the shadow of one's past is never far behind.

10 Cases Where Online Activity Came Back to Haunt I

Wednesday, September 23, 2009 by David Castor

This article is just too good and deserves a repost on the Business & Culture Blog. I am an Indiana technology lawyer focusing on entrepreneurial law, SaaS business law and technology law. As such, this article hits home as it lies at the intersection of social media and legal process. The article is by Robert Ambrogi and posted on the IMS Expert Services blog. I will repost it in 3 parts - all are worth reading.

What happens in Vegas stays in Vegas. The same is not true of what happens online. With increasing regularity, litigants, lawyers, witnesses, jurors and even judges are seeing their online activities come back to haunt them in court.

This month, Bullseye brings you the best of the worst – 10 of the most outrageous examples of people caught in the courtroom by what they did on Facebook, Twitter or elsewhere online.

Next month, we will tell you how to participate in social media safely, so that your online activities don't get you in legal hot water.

10. Counting keystrokes
Mary Mack, corporate technology counsel for the e-discovery company Fios Inc., once worked on a personal injury case in which the plaintiff claimed that his injuries left him unable to use his hands for anything but minimal activities. Searching the Web for information about the plaintiff, the defense team discovered that he was a blogger. Not only was he a blogger, but he was a prolific blogger.

Had the defense counsel simply confronted the plaintiff with his numerous blog posts, that probably would have been sufficient to discredit him. But the defense team went an extra step. It downloaded all his blog posts and calculated precisely how many keystrokes would have been required to write them all.

When the defense confronted the plaintiff with that number at trial, the plaintiff's facial expression no doubt said even more than his well-functioning fingers ever could.

9. Texting is a no-no
During a video deposition, the deponent, an executive of the company being sued, was in California. Plaintiff and defense counsel were in New Jersey. The deponent's pro hac vice attorney was in Michigan. The video stream showed deponent and his PHV attorney from only the chest up.

Turned out, deponent and his counsel were busy below chest level, texting each other throughout the deposition. No one might ever have been the wiser, had PHV counsel not inadvertently addressed one of these text messages to plaintiff's counsel.

Needless to say, plaintiff's counsel went straight to court, demanding to see the text messages. The defense fought their release, arguing attorney-client privilege protected them. A federal court in New Jersey sided with the plaintiff and ordered the text messages handed over. Texting was no different than passing notes, it ruled, and violated the Federal Rules of Civil Procedure.

8. Twittering from the bench
A magistrate in England found himself steeped in hot water after it was discovered that he was "tweeting" about his cases. It all came to a boil after another magistrate discovered the tweets and complained.

The tweets came after the magistrate was called in on a Saturday to hear bail applications for defendants arrested the night before. "Called into Court today to deal with those arrested last night and held in custody," he tweeted. "I guess they will be mostly drunks but you never know."

He continued to tweet as he heard the cases of three men accused of robbery. For example, one tweet said, "1st defendant. Conspiricy to rob TSB of £500,000. Good start - wrong previous convictions presented." He later concluded with this tweet: "Finished hearing bail. 3 refused for planning robbery of £480,000 from Tsb in Dawley, Telford."

When the magistrate learned that his tweets were to be investigated by a judicial advisory committee, he chose instead to resign from the bench. But even as he resigned, he maintained he did nothing wrong. Where better to defend himself but on Twitter, where he posted this explanation: "I didn't tweet whilst sitting in court but in the retiring room during the break and at the end of the hearing."

Why Do I Need to Know About Consequential Damages?

Monday, September 21, 2009 by Janet Monroe

Operating under Indiana entrepreneurial law, I have seen a great number of contracts across my desk, and many for new business owners plunging into a world of negotiations. Fresh out of the gate, it's important for savvy business owners to get up to speed quickly on essential provisions that should be included in their contracts.

For instance, for business owners who are retailers, wholesalers, or merchants who otherwise sell "property" (essentially, products that you can pick up and move), they are operating under the Uniform Commercial Code (UCC). This is a uniform act passed by the Federal government to provide consistency between the states.

Each state has adopted certain provisions of this act and incorporated into their state statutes, thus becoming state law. In litigation, courts will abide by the state business law statutes and look to the UCC to fill any gaps that may be subject to interpretation. Generally speaking, the UCC has been adopted fairly uniformly across the board with some discrepancies between the states, so it's important to understand how it may apply to your transactions while being aware of the local implications.

As an example, within the UCC, there is a definition for consequential damages, which are sometimes referred to as special damages that can open up a seller to a tremendous amount of liability if they don't negotiate this out of their contract with a disclaimer.

While direct damages are exactly that, damages that are caused directly by a breach of a contract (such as the cost to repair or replace the item, loss of value to it, damages caused to the product), consequential damages are a step beyond. Consequential damages are those that are:

reasonably foreseeable by the parties
at the time of contracting, and
caused by a breach of the contrac
t

This is a factual determination that will be decided by the court, and could result in thousands of dollars in losses for a seller. If a court decides that the buyer is awarded consequential damages, a seller could be forced to pay damages that would include loss of profits or revenue. This could be exponentially higher than the cost of the product depending on the situation.

Don't get caught contracting without the proper terms in place to protect you, such as a disclaimer statement to consequential damages. These disclaimers are often accepted by the courts as a reasonably negotiated term of an agreement and enforceable (depending on the jurisdiction).

Business law firms like Alerding Castor Hewitt, LLP are here to help. Give us a call.

Indianapolis - A Leader in Technology

Monday, August 10, 2009 by Janet Monroe

It's exciting to be apart of the city of Indianapolis, and even more so when you get to be involved with those who are shaping the future of Indiana technology.

Business law firms are a great place to practice as a technology attorney. I am fortunate to live in a world where software start-ups and fresh business ideas (that often times are solving tomorrow's problems) crop up everyday and are a way of life. You would be amazed at some of the exciting new software developments that are underway for Indianapolis in the next couple of years.

Surrounded daily with people who are focused on creating that next great idea, I firmly believe that entrepreneurial law may be the most rewarding area for an attorney to practice. I enjoy being able to participate in such a positive way- at that initial level where private equity investors may be considered, or assisting in the strategy for the co-founders to create the most beneficial corporate structure for their entity.

An Indianapolis start-up that I'm particularly excited about is one driving e-commerce, using Compendium Blogware's software, called Global Toaster.

Entrepreneurial Law - Check Out IndianaStartup.com

Monday, July 20, 2009 by David Castor

If you have not yet seen it, check out IndianaStartup.com. This site is a general resource for entrepreneurs, start-ups and small businesses. The content is nothing less than fantastic.

The site was developed by Indianapolis attorney Brian Powers – a friend of Alerding Castor Hewitt, LLP. I have great respect for Brian and his law practice. He is not only a very knowledgeable attorney, but his background as a business owner provides him a rare approach towards entrepreneurial law and business law from a business owner’s perspective – something I strive to do as well.

The site touches several topics related to entrepreneurial law, from entity organizational matters, to SBA lending, to seeking private equity investors.

IndianaStartup.com also provides services which are unique for entrepreneur information sites. For example, it actually provides a platform for start-ups to register to be featured in the Start-Up of the Week feature. Thus, it helps small businesses in their effort for recognition in the marketplace.

This is a great site.

Blogging for Search

Thursday, June 11, 2009 by David Castor

I am a HUGE fan of Compendium Blogware. If you have not considered the value of business blogging as a tool for search engine optimization (SEO), you need to. Here is the value received by my SaaS law / Entrepreneurial law firm over the last year.

I started the Business & Culture blog (powered by Compendium) about 12 months ago. Key search terms for my blog are listed on the right side of this page (e.g., Angel Investor Group, Private Equity Attorney, Funding Law). I landed my first client as a result of search last November; Second in December; Third in January. I struck up a good relationship with a capital group in Southern CA through search in January. This group has funded one of my Indiana technology clients already and is considering investments in a few other clients.

Since March, I am getting nearly one call every other week as a result of search.

Not to sound to infomercial on behalf of Compendium, but the ROI in this tool (in terms of dollar and time investment) has proven big.

I can only give so many details on the clients and contacts made, but here are some recent examples:

1. This week, a SaaS company from southern city found my blog through a google search for "SaaS Law". We came up #2 on the google results page - and top law firm. That got us in the door for initial conversations where we secured the engagement. We are moving forward with an initial contract review project and counsel on future equity rounds.

2. Last month an established capital group in New York found the blog through google search for "Entrepreneurial Law Firm". We came up as #1 on the google results page. Again, this got us the initial contact. Through four weeks of discussions we have secured a good working relationship with this group. I am flying out to NY next week to work on four early stage SaaS client equity raise deals with them.

3. An established mountain-state real estate group found the blog through a google blog search for "Private Equity Attorney". We came up as #1. We helped this group structure their equity raise last month.

In summary, I have seen first hand the value of solid SEO. If you have not considered business blogging for search, you should.

Entrepreneurial Law Update

Wednesday, June 3, 2009 by David Castor

This has been a hard week for me to get blogging. The problem is a great one to have - I have a lot of client projects going right now and am finding the time to sit down and write difficult. So, rather than a typical blog post, let me provide some updates on what has been keeping me busy lately.

As the economy is showing signs of life once again, many of my entrepreneurial clients are finding opportunities for strategic partnerships, private equity funding, bank financing and customer engagements. There is probably nothing more fun in my entrepreneurial law / funding law practice than to see business clients get funded and reach business goals.

Over the last few weeks I have secured relationships with two new private equity firms - one in Indianapolis and one in Chicago. I will be visiting the firm in Chicago next week. I am optimistic that both will help fund innovative technology businesses in central Indiana.

I have also furthered my relationship with a global private equity firm in Los Angeles. The group has three business clients of mine in due diligence stages currently. Exciting stuff.

LightsOut Intelligence is making huge headway in the web analytics world. We have already secured some private equity funding and expect to begin pilots with clients later in the summer.

We have also been working on several technology and software licensing transactions. In the last week, my firm has handled nearly twenty deals in these fields.

These are exciting times at Alerding Castor.

A Private Equity Attorney

Monday, May 4, 2009 by David Castor

Being a private equity attorney is fun. Despite the current economic climate, Madoff, AIG bonuses and States' misuse of economic stimulus funds, businesses continue to raise capital and grow. They continue to innovate, add employees, and develop businesses. They continue to add to and help fix the economy.

This is part of the fun of being an entrepreneurial law / business law attorney who helps business owners realize their capital growth goals. You are part of the strategic growth of business and culture.

Today alone I worked with six companies that are pursuing private equity raises. All of the companies are Indiana technology businesses. Three are SaaS (software as a service), one is IT infrastructure, one is business intelligence, and one is procurement software.

One of these came from an angel investment group I work with from Chicago. This group is looking for deals in Midwest technology companies. Another two are being presented to a group of private equity investors in Orange County, CA this summer. A final is being considered by a local angel investor group.

It is encouraging to see businesses still innovate and grow. It is also encouraging to see these businesses get funded!

States Need to Support Innovation and Entrepreneurship

Tuesday, April 14, 2009 by David Castor

The National Association of Seed and Venture Funds (NASVF), a national organization of public and private equity firms and private equity investors, released a study this week of 5,000 early stage funds and providers that support young entrepreneurial companies and found that State level funding for these companies is dire.

According to NASVF’s press release:

The survey found that the vast majority of young innovative companies across the United States – the emerging Microsofts, Ciscos, Apples and Genentechs of the 21st century --cannot find the early and seedstage financing needed to develop their products and services and bring them to market. Many venture capitalists that used to provide this critical phase of funding aren't making new, early-stage investments are also having difficulty raising capital.

“We are very concerned that we could lose a generation of technology companies because venture funds can’t raise additional capital,” said Jim Jaffe, President/CEO of NASVF. “The results of the survey were very disturbing and show that Congress and the President need to act quickly before hundreds of millions of already invested dollars and high paying quality jobs are lost.”

The study found:

• 90% of the already-funded companies can’t obtain follow on funds to get to the next level.
• 75% of the money received by seed and early stage venture funds comes from private investors.
• 70% of the money needed to fill this early stage investment gap is less than a million dollars per company.
• 60% of early stage funds aren’t making any new investments.

Of course, we have seen this in Indiana where our only State sponsored technology venture fund, the 21st Century Fund, is extraordinarily limited in investment scope and may even go under this year. Further, none of Indiana’s share of the economic stimulus funding is going to entrepreneurship and business innovation. The only thing Indiana does have is healthy higher education institutions that foster innovation through their research parks and business incubators, but these businesses are limited to those that arise from university-born technologies.

It is time for State governments to step up and support entrepreneurship and innovation. It is here that businesses grow, jobs are created, wealth is built, commercial spending climbs, and tax revenue for the State increases. That is economic stimulus!

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See also:

US Private Equity - Requires Self Awareness

Funding Law - Buyer's Market
Funding Law - Investing in Midwest Technology Companies
Angels are Still Investing
Private Equity VIII – Environment for Buyers and Sellers

Private Equity in 2009 – Don’t Give Up
Private Equity VII – More on Angel Investors

Private Equity VI - Raising Angel Capital
Private Equity V - Raising Capital and Not Telling Lies
Private Equity IV - Angel Investors Get Picky
Private Equity III
Private Equity II
Private Equity I

Funding Law - Investing in Midwest Technology Businesses

Wednesday, February 25, 2009 by David Castor

A friend and client of mine, Doug Karr, wrote a good post this week entitled "Where to Start a Startup?" I appreciate Doug's candid comments regarding the climate for private equity investors in Indiana. Key question - "Starting a business requires funding. Does Indiana have it?"

Indiana (and its business leaders) needs to continue supporting innovation and excellence in entrepreneurship - especially if it wants to remain a market leader in technology industries. As a funding law / entrepreneurial law attorney who helps clients find global private equity investors, I monitor this climate closely. Currently there is only one State sponsored fund, 21st Century Fund, which focuses on biotechnology innovations over software and SaaS solutions, a few university funds that focus on innovations arising within their own institutions, and a handful of private equity funds that seem to focus on privately held companies with either (a) EBITA of $2M plus or (b) emerging companies that are post-revenue and tied closely to one of the funds' members. This has to change if emerging companies are going to continue to be drawn to this State.

This is not the case in other regions of the country and world. As I visited with officers of private equity funds in Orange County, CA last week I was reminded and encouraged that angel investors in other regions of the world are hungry to invest in pre-revenue technology ventures - including those located in the low-cost-of-living Midwest. The funds are out there - key is just knowing where to look.

On the Economic Stimulus Plan II - 1,000 by $200,000

Wednesday, February 18, 2009 by David Castor

Earlier this week I wrote a post on my issues with the Economic Stimulus Plan passed by our Congressional and Senate leaders last week (and signed by our President yesterday). Sorry – I don’t use this Blog to rant often, but this one ticked me off. In the post I noted that $200M of the funds designated to Indiana are set aside with few strings attached.

Former President Clinton summarized the three goals of the bill on Larry King last night:

1. Put money in people's pockets who are in trouble now (e.g., extended unemployment benefits, modest tax cuts, increase in food stamps…).

2. Give a chunk of money to State and Local governments for economic development.

3. Create jobs through existing road and bridge contracts, through rail improvements, through modernization and especially through clean energy and energy efficiency.

Don’t get me wrong, I don't have a problem with any of these goals – but the point of the bill is to stimulate the economy not just create government jobs or extend welfare. Those are right actions but for separate laws!

Political and business leaders have come out of the woodwork with their ideas of how to spend the State funds (#2 above) – everything from improving 3rd tier city airports, to fixing up county roads to granting money to the failing recreational vehicle (RV) industry.

The number one driver for stimulating the economy is the promotion of innovation and entrepreneurship in our cities. With that in mind, here is an idea for how the funds should be applied:

Imagine 1,000, $200,000 grants to emerging businesses. Think about that for a second. $200M divided by 1,000 is $200k - that would be 1,000 Indiana businesses that would be given REAL and DIRECT help by our State to advance innovation.

Change the numbers if you want – 500 $400,000 grants, or 200 $1,000,000 grants – doesn’t matter. Key is, the money would be going directly to factors that actually stimulate the economy.

In my entrepreneurial law / funding law practice I have seen tons of start-up and emerging companies that would kill for a cash infusion like this – even if strings were attached and the money could only be applied to innovation initiatives. This is especially true with my clients in innovative markets (e.g. Indiana technology, SaaS and software licensing). This can be the difference of whether or not a business gets a good product to market. As revenues and profitability grow, jobs are created… this leads to increased employment… which leads to increased community income… which leads to increased spending… which leads to a better economy.