Take it to the bank, tech entrepreneurs

Last byte | A conversation with lawyer Edwin Miller Jr.

Edwin Miller Jr., of law firm Sullivan and Worcester LLP in Boston, has
practiced corporate and securities law for more than 30 years. He has represented
emerging and established technology companies on their financing,
technology transfer, and mergers and acquisitions activities. His new book,
"Lifecycle of a Technology Company," is a step-by-step guide that offers legal
and business advice to anyone contemplating starting a technology company.
The book provides advice for a company from start-up to sale. Associate Editor
David Hubler recently spoke with Miller about his book.


Q: You imply that many entrepreneurs don't
have a clue about forming a company.


Miller:
True. A lot of professors at top universities
are starting companies. They're the ones
at the forefront of science and engineering
developments. Guys with maybe 190 IQs often
don't know the first thing about any of this.
You need to know how to finance the company,
handle the technology and intellectual property
? making sure the company owns the intellectual
property. You want to do all the legal
fundamentals correctly. Even very smart people
are really quite unsophisticated about this.

Q: What are the biggest pitfalls in starting a
business before consulting an attorney?


Miller:
One huge pitfall is on the intellectual
property side. There are certain things you
need to do to secure patent protection for
your invention. If you do them wrong, you
can basically end the show right there. In
academia, there's always the temptation to
publish your great idea. If you publish your
invention in some public journal, you blow
foreign rights and you may even blow U.S.
rights. That's death knell No. 1.

Q: You warn against the use of open-source
software. Why?


Miller:
Just about everybody uses open-source
software. But if you use it in a certain
way in your product, you essentially might be
obligated under the open-source software
license to publicize the things that you do or
make those things available to the public.
There are ways to deal with that ? say, by
isolating the code that is proprietary from the
open-source code. You need the advice of a
licensing lawyer and software developers who
know what they're doing.

Q: What attributes should an owner look for
in potential partners?


Miller:
Ideally, you want people with experience
having done something similar.

Inventors typically aren't great businessmen,
so you want a team that can cover all the
various functions. It doesn't have to be a
big team, but it should have experienced
people.

Q: What makes a good business plan to
show investors?


Miller:
There's a difference between what
you give potential backers in a first meeting
and the full business plan you give them
later. A business plan should resemble a
prospectus for an initial public offering but
without the extreme polish, the legalese and
the detail. You want to give a background
about the industry, pointing out what it
doesn't do well and how you've figured out a
way to solve the problem. You need to
describe it but not on a very technical
level. You also need to describe the management
team and give some financial
projections going forward.

Q: At what point should entrepreneurs
seek the advice of a lawyer?


Miller:
If you're just batting around
ideas, you don't want to go running to a
lawyer. But once the concept starts to get
serious and you're committing real time and
energy and the project is coming together, it's
very important to go to a lawyer because you
can make some serious mistakes very early
that you can't recover from. You have to prepare
in advance for when things aren't going
right.

About the Author

David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.

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