Courts May Embargo Web Sites

This CSO Magazine article comments on the case of Cobell v. Norton,a class-action lawsuit that was filed June 10, 1996, in the U.S. District Court in Washington, D.C.,stating:

“The Cobell case is highly significant because it constitutes precedent for the idea that, even in the absence of proven intrusions or damages, courts can enter a protective order to secure a website until security can be established on the site. This gives privacy advocates a new and potentially potent tool against the argument that, even if personal information is compromised, a lack of evidence of loss precludes a finding of damages. In other words, ‘no harm, no foul’ may no longer be the rule. Cobell litigation also warns that, in the absence of a clear security standard for each industry, courts will likely establish their own security standards by using 20/20 hindsight.”

Partner to Maximize IP Profit

From I/P Updates:

According to an article in the September 27, 2004 The McKinsey Quarterly,”McKinsey research shows that in lots of cases, companies could earn 5 to 10 percent of their operating income from the sale or licensing of intellectual property, yet most earn less than one-tenth that. Too often, they don’t know what they have, what it is worth, or what other industries could do with it. The solution is to build a network of outside specialists who can identify the best market for each asset and use their industry contacts and experience to negotiate a sale.”

More from the McKinsey article:

“Most companies’ attempts to make money out of their intellectual property suffer from the mistaken belief that it is an easy source of revenue. But capturing the full value of these assets requires systematic effort, a well-managed network of outside partners, and active senior-management support. ”

Built to Flip: A New Road to Riches

This article from Business 2.0 examines the trend of an “emerging breed of here-today, bought-tomorrow startups that are sprouting with minimal funding, flowering briefly, and being gobbled up by far bigger companies. In many instances, these built-to-flip outfits forgo — or sometimes can’t get — money from venture capitalists. They instead create shoestring operations focused on the rapid development of narrow technologies to plug gaps in existing product lines or add useful features to existing products. Then they look to a deep-pocketed patron to scoop them up. ”

Via E M E R G I C . o r g

Biting the Hand

Quentin Johnson writing for Law & Entrepreneurship News offers a good summary of an article entitled “Hostile Environment” from the Daily Deal, in which securities litigator Kimberly Greer writes about a growing trend of entrepreneurs suing their VC investors claiming the VC’s are violating their fiduciary duties to the company.

The Entrepreneurial Mind: Write Your Own Plan

Dr. Jeffrey R. Cornwall includes the following in his advice to all aspiring entrepreneurs about business plans:

1. Business plans should be the last thing you do, not the first.
2. Figure out how much you need to make in income and look at all of the non-financial factors that are important in your life.
3. Research the market to make sure that there is really a market.
4. Examine what it will cost to provide the service or make the product.
5. Make sure you know what you’re getting into.
6. Now it is time to write your plan, but first you need to figure out why you need a plan. A plan you write for yourself is very different from a plan you write for an investor. Know the audience of the plan. You probably will need to write a couple of different versions for different uses: one for you, one for your investors, and one for creditors. If the plan starts to break down financially or in your ability to make it happen, give it up and go on to your next idea.

How to Develop Software

This post by Barry Briggs offers many great tips for software developers. Included among them are these:

“1. Great software is built by small teams. If you’re building a great BIG software product use lots of small teams. The team leaders should be able to carry on a civilized conversation with one another; conversely, they should not be trying to torpedo each others’ careers behind their backs.

2. Great software projects always, always have one person who gets the big picture. He/she codes. Repeat: he/she codes. This person is called the architect.

3. Software “architects” that don’t code are not software architects. Sorry.”

Selling Your Business

From the WSJ StartupJournal:

“Given the emotional trouble many entrepreneurs have selling or passing on their businesses, you would think they were giving away one of their own children.

In many cases, that is exactly how they feel about the entity they have helped nurture, cultivate and watch grow over the years. So when it is time for that baby, as well as the entrepreneur, to move on to the next phase of their respective lives, there are a variety of issues to iron out before even thinking about things like getting the best sale price or minimizing tax implications. “

Venture Capital Broken?

Gems from an article by Joel Spolsky

“There are certain fundamental assumptions about doing business in the VC world that make venture capital a bad fit with entrepreneurship…

The fundamental reason is that VCs do not have goals that are aligned with the goals of the company founders. This creates a built-in source of stress in the relationship.

Specifically, founders would prefer reasonable success with high probability, while VCs are looking for fantastic hit-it-out-of-the-ballpark success with low probability. A VC fund will invest in a lot of startups. They expect about seven of them to fail, two of them to trudge along, and one of them to be The Next Netscape (“TNN”). It’s OK if seven fail, because the terms of the deal will be structured so that TNN makes them enough money to make up for all the losers…

The second part is the fact that VCs hear too many business plans, and they need to reject 999 out of 1000…When you have to say “no” 999 times for every time you say “yes,” your method becomes whack-a-mole. Find the flaw, say no. Find the flaw, say no. The faster you find flaws, the more business plans you can ding…

Here’s another funny thing that’s happening. VCs are reacting to the crash by demanding ever stricter conditions for investments…There are probably hundreds of software companies started every day. Of that universe, there is a small number that are actively looking for early stage investors. Of that small number, an even smaller portion is willing to go along with the current harsh deals that VCs are offering… ”

Via del.icio.us/dbayless

Open Bar Provides Open Source Legal Resources

From Denise Howell:

“Open Bar is a not-for-profit organization founded with the goals of (i) developing clear information about the legal rights and responsibilities of software developers, legal professionals and users of software in the emerging arena of open source/free software; and (ii) educating software developers, legal professionals and the general public about the issues, rights and responsibilities associated with the development, use and distribution of open source/free software.
[…]
The demand for education and leadership from the legal community is high and increasing daily, yet until now no legal, non-political group has stepped up to stem the tide of conflicting information and lack of clarity. Open Bar seeks to fill this gap, by (i) fostering development of objective means for evaluating the strength and enforceability of the various licenses and (ii) educating legal professionals and other members of the open source and free software communities on their related rights and responsibilities.”

No King Makers in VC Business

Jeff Nolan offers good advice to entrepreneurs to pick their VC’s wisely. Changing a few words from the article:

A productive and value-creating relationship is one where the players get along well together and respect each others contributions, the leadership team is strengthened with a good backstop provided by the board, and ultimately that the company performs to expectations because all of the parts mesh well together and deliver the right product to the right market at the right unit economics.

As investors and management, it is prudent to consider all the things that can go wrong and then assess each investors ability to manage through those obstacles, before committing to a particular VC. If the VC can’t be a team player, it’s not likely they will create significant value.

“There are no king makers in this business, building a successful company takes some luck, but a lot more hard work from everyone, including the board of directors. “