Not All Cities Are Start-Up Friendly

Reading through some of the other articles had me thinking about what really makes an entrepreneur successful. The first thing that came to mind was how there are some businesses that previous would not have been possible, but the landscape has change and it is now possible – dispensaries. When I stumbled upon the article posted about Uber, my home city came to mind – Buffalo.

Although NYC has had Uber for years, Buffalo (and the rest of upstate NY) has been banned from using the service. This is not just a problem for those that are currently living in Buffalo and Uber, but for those that may want to startup a ride sharing service headquartered in the region.

Upstate NY is moving towards a new agreement to allow Uber, but the point stands to show that not all places are suitable for certain start ups. Sometimes, the block comes from geography, while the more disappointing block comes from politics.

https://buffalonews.com/2016/11/17/demand-uber-grows-buffalo/

Kenji: “Legal is Broken” for the Entrepreneur

This article features a talk by the founder of Kenji, a startup hoping to match small business owners with attorneys through an online marketplace and ‘bidding’ system. The founder asserts that “legal is broken,” especially for small businesses and entrepreneurs, for three main reasons: “Addressing legal is Time Consuming, Expensive, and Frustrating” (talk at 0:52). Dovetailing off of this, the founder asserts that finding work is suboptimal for attorneys (likely he means small or solo practice) for three reasons: it’s “Time Consuming, Unpaid, and Frustrating” (talk at 1:15).

Kenji has instead created a “legal hub that guides, connects, and facilitates legal relationships.” (talk at 2:45). Essentially, it has created an online marketplace where potential clients can post projects, and attorneys can bid on those projects. It seems somewhat similar to fiverr for graphic design projects. This is an interesting idea–it finds a way to connect small or solo practice attorneys with small businesses. It will be interesting to follow the company as it continues to grow.

Will Millenials Ever Get to Be Entrepreneurs?

The article below begins by touching on something that we discussed in our very first class: that when we look at the statistics, real entrepreneurs tend to be older than we expect.  But this article raises the question about whether millenials will ever become entrepreneurs at all. One reason our generation might have lower rates of entrepreneurial behavior is our debt.  We simply cannot afford the risks associated with starting a new business. Another issue not really addressed in this article, but something worth thinking about, is the low rate of home ownership and its impact upon the potential to become entrepreneurs.  Like the entrepreneurs in emerging economies, young Americans might not have physical collateral necessary to secure loans.

https://www.theatlantic.com/business/archive/2016/07/the-myth-of-the-millennial-entrepreneur/490058/

How Entrepreneurs Are Told to Look for a Lawyer

Here is an interesting piece that shows things perhaps from the other side of the table than we are used to. It an article on a website dedicated to entrepreneurs, instructing them on techniques to use in finding a lawyer, and what to look for. We should remember that many of our potential clients may not like lawyers or may not think that they need one, and so we should try to put them at ease at initial consultation meetings and the like.

The article also points out the preventative benefits that hiring an attorney before a problem arises can have. This is another opportunity for branding or marketing ourselves–although litigators are typically reactive, other attorneys can be more proactive in nature. For example, an attorney advising a start up with many employees could draft a strong employee handbook, which could head off numerous problems down the line, including at will employment disclaimers, sexual harassment policies, etc.

I think the lesson learned from this is that we should try to put ourselves in the client’s shoes at many points through the process, and continually reassess how we are providing services.

Entrepreneurship Legal Clinic

It appears that BU Law and MIT have joined forces to create an entrepreneurship clinic, where upper level law students can advise entrepreneurs, in an effort to either prepare them for advising such clients in practice, or as a precursor to them themselves becoming entrepreneurs. (The article also makes it sound like BC and Michigan Law have created similar clinics). This seems like an interesting way to provide legal assistance to startups that may not be otherwise able to afford it, and a way to prepare law students for a modern day practice. I am interested to see how many other law schools follow suit in creating such a clinic.

Entrepreneurs Should Think About Their Happiness

https://www.entrepreneur.com/video/289351

This is an interesting article about how a former Editor in Chief of the Yale Law Journal and clerk to Justice Sandra Day O’Connor quit her law job and became a writer/entrepreneur. The subject of the piece, Gretchen Rubin, has some tips for how to be happy–both in ‘regular’ jobs and when starting a new career or business. One quote that stood out to me was “I know 80 percent about a lot of things, but I go to the people that know 100 percent about one thing.” You need to be willing to consult with experts, and there is no point in being too proud to do so. I also appreciated her insight into thinking about who you ‘envy’ professionally, and thinking about why you do–perhaps this could be an insight into what you ‘really’ want to do with your life!

Thinking about the Exit

This article offers a perspective on a different time period than we typically cover in class: the time surrounding and directly after the negotiation to sell a start up. It offers important considerations that are often overlooked. Although sharing insight like this with entrepreneurs and business owners, etc. themselves may be helpful, I think the most powerful way to convey such considerations during this process would be for the attorneys negotiating the deal to raise them with their respective clients. These attorneys should not just be thinking of the deal itself, but should also consider raising issues such as those mentioned in the article with their clients.

For example, an attorney could negotiate and draft a fantastic employment agreement for the original founder of the company after he is bought out. But has the attorney thought about the “grudging partner” problem? As the article points out: “Rarely is there a conversation, yet alone an agreement, before closing around how buyer and seller will actually work together after the sale.” Such considerations can go a long way in ensuring a healthy business deal, rather than just an iron-clad legal one.

Taxes and Small Businesses

Tax laws are continuously evolving. This list of new tax law changes for 2017 applicable to small businesses shows that. This helps to show that small businesses and entrepreneurs should probably consult with a tax advisor early on in their business, in order to take advantages of some of the tax benefits in place for business entities. For example, the article points out that there will be a bonus depreciation period for assets “placed in service between 2015 through 2019.” This could be helpful to entrepreneurs who use depreciable assets, but, of course, only if they know about the provision. Although it may seem expensive or unnecessary to consult a CPA or other tax professional, my suspicion is that most small businesses and entrepreneurs would benefit from such a consultation.

Uber and Law Enforcement

Uber has made the news recently with reports about a purportedly secret technology platform to avoid picking up undercover law enforcement officers. Although this seems extreme, it adds an interesting perspective to thinking about how start ups (although Uber is no longer a start up, it surely once was) should deal with legal regulation. Uber’s strategy appears to be avoidance. Clearly, there are other options available, such as compliance.

Why women entrepreneurs will be the economic force to reckon with in 2017

Link

I have always thought that entrepreneurship among women was important and I am happy to see that there are more in 2017. Women entrepreneurs can serve as mentors to the next generation of entrepreneurs and increase diversity in business. One thing that is interesting is that women seem to get funding from family and friends and bootstrap their way through the early days of their business, rather than obtaining funding in other ways (venture capitalists etc). In comparison, a greater percentage of their new business capital comes from self-funding.

http://www.cnbc.com/2017/02/28/why-women-entrepreneurs-will-be-economic-force-to-reckon-with-in-2017.html

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This start-up is based on playing games to find your best career fit    Tuesday, 28 Feb 2017 | 10:30 AM ET | 00:50
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The Golden Age for women entrepreneurs has finally begun. The stars have aligned to help trigger the trend as robust ecosystems churn out enterprising females equipped with inspiration, know-how and funding. In recent years, the rate of women entrepreneurs has been growing at a percentage at least double that of their male counterparts.

A microcosm of the trend is CNBC’S inaugural Upstart 25 list, where 10 of the company fledglings were founded by women in a host of industries — from neuroscience to finance to retail. Some also offer products and services with a social mission that are geared to women.

Take the founders of Dia & Co., No. 11 on the Upstart 25 list. When Nadia Boujarwah and Lydia Gilbert met at Harvard Business School in the fall of 2011, they began talking about the yawning gap in the retail market in serving women who wear sizes 14 and up. “I have been this customer all my life,” says Boujarwah.

On the hunt for fashionable clothes, they dreamed up the idea of a home-shopping service for plus-size women. About a year after graduation, they turned their idea into Dia & Co., a New York City-based company that sends subscribers boxes of clothing selected by a stylist. Recipients can buy what they like and return the rest.

Their target customers responded enthusiastically in market research, but the investors they approached in the mostly male investment community were skeptical. One reason was because plus-size women tend to spend less on clothing than women who wear smaller sizes, says Boujarwah.

“We tried to go to early-stage venture capitalists and professional angel investors and found that it was pretty challenging not just to be female entrepreneurs raising money in the world of venture capital but also female entrepreneurs serving a female customer very few people understood,” recalls Boujarwah.

That wasn’t the end of the story. Determined to succeed, the two women went on to raise “under $1 million” in convertible debt from friends, family and colleagues and grew the business on a shoestring, says Boujarwah. When they hit “hundreds of thousands of dollars a month in revenue,” she says, they returned to the venture capital circuit.

This time around, Boujarwah and Gilbert raised money from investors, including some early skeptics, and went on to bag a reported $18 million in September 2016 in a Series A round led by Sequoia Capital. All told, they have raised $25 million, said Boujarwah, who declined to share the firm’s revenue.

“There is more of a focus on hearing what women have to offer and recognizing the value of investing in them.” -Elizabeth Ames, senior vice president, Anita Borg Institute

Dia & Co. is among many companies on the Upstart 25 that believe products that target women is a fast-growing, lucrative niche. At digital investing platform Ellevest (No. 9 on the Upstart list), co-founded by Wall Street titan Sallie Krawcheck and tech entrepreneur Charlie Kroll, for instance, many customers are female. “What we have done a lot of work on is identifying that women have different needs when it comes to investment advice and financial management,” says Kroll.

A global phenomenon

The strong representation of women on the Upstart 25 list reflects the growth of female entrepreneurship both at home and abroad. Women now make up 40 percent of new entrepreneurs in the United States — the highest percentage since 1996, according to the 2016 Kauffman Index of Startup Activity.

Meanwhile, in the 40 economies participating in the sweeping Global Entrepreneurship Monitor (GEM) survey in both 2011 and 2016, women’s entrepreneurship rates rose by 13 percent on average, while male rates increased by 5 percent, according to lead author Donna Kelley, a professor of entrepreneurship at Babson College, which prepares the report with Baruch College.

The growth has been very swift in recent years. From 2015 to 2016, women’s entrepreneurship rates increased by 10 percent on average versus 5 percent for males, across 51 economies that participated in the GEM survey. And in 29 of the 51, the ratio of male to female entrepreneurs has increased.

“The gender gap has closed in many countries, where women are as likely or more likely than men to start businesses,” says Kelley.

So what is sparking women’s interest in the start-up scene? Marketplace trends, expanding financing options — including the rise of venture-backed funds led by women — and greater access to mentors and role models all contribute, say experts.

“There is more of a focus on hearing what women have to offer and recognizing the value of investing in them,” says Elizabeth Ames, senior vice president of marketing, alliances and programs at the Anita Borg Institute, a Palo Alto, California, organization focused on recognizing the contributions of women in computing.

Role models pay it forward

And there are more high-profile examples of successful women entrepreneurs to spur women on. Julia Collins, co-founder of headline-grabbing Zume Pizza (No. 1 on the list), and partner Alex Garden, for instance, closed a $2.5 million seed round in Silicon Valley in four days. Garden is the former president of gaming powerhouse Zynga Studios.

The duo — who initially worked together via Skype and met in person for the first time when they began raising funding — use robots to bake pizza inside of a high-tech van supported by small “sprinter” vehicles that make deliveries. Eight-slice 14-inch pizzas start at $15 — reflecting Zume’s goal of bringing wholesome food, free of artificial ingredients, to people on moderate budgets. The company, which has sold 25,000 pies since it was founded in September 2015, reportedly raised another $23.8 million in a Series A round at the end of 2016.

“One of the things about being in Silicon Valley is, you have much better access to start-up capital,” says Collins.

Crowdfunding has also helped some women gain a toehold as entrepreneurs. Although female entrepreneurs are less likely to use crowdfunding than men, they raise an average of 10.75 percent more money than their male counterparts, according to the GEM report.

Markit Opportunity (No. 4) relied heavily on crowdfunding when it got its start. The for-profit social enterprise, based in Kenya, developed a mobile platform that enables multinational corporations to buy responsibly from small-scale farmers in developing countries. Co-founders Ashley King-Bischof and Zeluis Teixeira raised $6,612 on Indiegogo to do a small pilot and are now looking for additional funding in a seed round — a task they know won’t be easy, given that potential backers often assume a social venture must be a nonprofit. “It will be challenging to overcome some historical notions of the often-false trade-offs between profit and social impact,” King-Bischof said on a Skype call from Nairobi.

Steep barriers remain

Despite substantial progress on the start-up front, the “scaleup gap” between men and women remains huge. “Female-owned businesses in general still start smaller and stay smaller,” says Arnobio Morelix, entrepreneurship researcher at the Kansas City-based Kauffman Foundation, which promotes entrepreneurship.

Only 3 percent of women-owned firms in the U.S. have “high economic impact,” generating $500,000 or more in revenue, compared to 9 percent of male-owned firms, according to the 2016 State of Women Owned Businesses report commissioned by American Express OPEN.
And relatively few women-owned firms smash through the $1 million barrier. Only 27.8 percent of firms with $1 million in revenue or more are owned by women or equally owned by men and women, and just 18.6 percent of companies with 500 employees or more are female-owned or equally male and female owned, according to research by the Kauffman Foundation.

“One of the things that could make more women-owned businesses scalable is programs to support women business owners through mentoring and helping them find access to capital,” says Alice Bredin, research advisor for American Express OPEN.

Plowing through funding obstacles

Despite the success of the women entrepreneurs on the Upstart 25 list, many women still can’t find the funding they need. More than 72 percent of women entrepreneurs said lack of access to capital was a challenge in one recent survey by the Kauffman Foundation.

(Left) Pymetrics co-founders Frida Polli, CEO, and Julie Yoo, chief data scientist

Source: Pymetrics
(Left) Pymetrics co-founders Frida Polli, CEO, and Julie Yoo, chief data scientist

The funding gap is particularly pronounced when it comes to venture capital. Only 10 percent of venture capital around the world went to women between 2010 and 2015, according to a study by TechCrunch published in 2016. “Women still get significantly less of the venture capital and investment dollars,” says Morelix.

It isn’t only because women pitch ideas male investors don’t relate to. Ask Frida Polli, a PhD who co-founded Pymetrics (No. 14) with partner Julie Yoo. The New York City start-up aims to match job seekers with positions that fit them well using neuroscience assessments and data algorithms.

Smashing old stereotypes

“I definitely think that you suffer from what I would call not conforming to the stereotype—the hacker in the hoodie or whatever you want to call it,” says Polli, whose firm serves clients such as Unilever and Accenture. “There is a kind of male stereotype investors sometimes look for.”

Pymetrics raised $2.5 million in a seed round and $6.4 million in a series A round in August, according to Polli, but many women raise little financing of any kind. Women entrepreneurs reported self-funding 61 percent of their total business capital, compared to men, who said they self-funded half in the Global Entrepreneurship Monitor 2015 United States Report, prepared by researchers at Babson and Baruch colleges. When women do raise money, they are less likely to get it from banks and more likely to turn to friends and family for financing than men, the research found.

(Left to right) Foodstirs Modern Baking founders Galit Laibow (CEO), Sarah Michelle Gellar (chief brand officer) and Greg Fleishman (COO)

Source: Foodstirs
(Left to right) Foodstirs Modern Baking founders Galit Laibow (CEO), Sarah Michelle Gellar (chief brand officer) and Greg Fleishman (COO)

But as some of the entrepreneurs in the Upstart 25 show, bootstrapping can sometimes give a business the runway it needs to gather the proof of concept it needs to win over investors.
Galit Laibow, CEO and co-founder at Foodstirs (No. 19 on the list), found that to be true.

Her Santa Monica, California, start-up sells organic, GMO-free baking projects online and in stores such as Fresh Market and Whole Foods. Foodstirs’ projects include the Ombre Pancake Kit, featuring bright pink pancakes, as well as the Frosted Cake Pop Baking Kit, to parents looking for a DIY project to do with their kids.

She and co-founder Greg Fleishman teamed up with Hollywood actress Sarah Michelle Gellar to launch the business and originally self-financed it. After quickly finding there was a market for their products, the company says they have raised $5 million from investors, including Beechwood Capital and Cambridge Companies. Although they won’t disclose their revenue, they claim to have surpassed their goals, and the 12-employee company is branching out to another 1,000 stores by June.

“We have enough to fuel the growth as the brand grows,” says Laibow.

That’s not something many women entrepreneurs could say in the past. But if the current growth of female entrepreneurship continues and more women scale their start-ups, lack of funding could become less of a perennial challenge in the future.

— By Elaine Pofeldt, special to CNBC.com