Armstrong Teasdale recognizes that startups play an important role in developing the next generation of ideas on a variety of fronts, from developing therapeutic programs for Neglected Tropical Diseases to enhancing the fast-growing eSports phenomenon for the professionals and institutions involved in in that community. . Through our “incubator to exit” services, Armstrong Teasdale guides startups over the legal hurdles that can easily trip emerging businesses and helps entrepreneurs to stay focused on the ideas and solutions that they are passionate about.
From each of the firm’s office locations, including the branch in the St. Louis Cortex Innovation District, Emerging Companies team members create a multi-disciplinary approach that helps startup companies protect their investment and use their resources in a cost and time efficient manner.
EMERGING COMPANY ISSUES
Over the past several years, we have worked with more than 60 startup and emerging company clients to bring their innovations and discoveries to market. While ideas and enthusiasm initially spurred these businesses, successfully managing multiple legal issues greatly affected their ultimate success.
Determining the structure of the business is vital to effectively managing risks and maximizing return. These issues include not only the choice of entity but also an assessment of who has ownership rights, or may think that they have ownership rights. Our Emerging Companies team guides startups through these issues, including:
- Determining the type of entity
- Establishing and documenting an ownership structure, including not only the identities of the owners but also the type of ownership (e.g., common stock, preferred stock, promissory note, etc.) and the rights associated with that ownership
- Drafting formation and governance documents
Raising Capital and Financing
Every emerging company faces the seminal question of how to fund its business. Some have ready sources of funding while others seek entry into various incubator, accelerator or other development programs. Still others need assistance in locating sources of much-needed financing to allow them to take their business to the next level. We have assisted startup clients with applications to and investments from a variety of angel networks, national accelerator programs and venture capital firms in St. Louis, Columbia, Kansas City, Missouri; Omaha, Dallas, San Francisco and New York City. Our Emerging Companies team also assists startups in obtaining all types of financing while protecting the founders’ investment and rights, including:
- Choosing the right partners who understand and value the company’s goals
- Structuring the rights and funding obligations of the investors so that they align with the company’s needs
- Complying with complex federal and state securities laws
- Drafting capital formation and securities documents consistent with the company’s objectives
Employment and Incentive Compensation Issues
As the company grows, employing, retaining and compensating talent will become crucial to the company’s success. At the same time, the company needs assurances that its employees and contractors will protect the company’s resources, including its valuable confidential information and relationships. Our Emerging Companies team helps companies to manage these competing interests while complying with complex employment laws, including:
- Creating reasonable and effective confidentiality, non-compete, and customer and employee non-solicitation agreements
- Drafting employment and independent contractor agreements that expressly protect the company’s rights in its intellectual property, including intellectual property created by the employee or contractor
- Preparing stock option plans, equity pools and restricted grant agreements to provide key employees proper incentives
- Implementing policies and manuals that guide and properly manage employees
- Advising the company about hiring and firing issues
Robust agreements for manufacturing, developing, distributing and selling products and services are key to protecting the company’s assets. Our Emerging Companies team creates form and specifically tailored agreements that clearly define the parties’ obligations and rights, including:
- Research and development agreements with academic institutions and private companies
- License and sale agreements, including basic terms and conditions
- Marketing and distribution agreements
- Joint venture and strategic alliance agreements
- Supply and vendor agreements
Intellectual Property, Technology and Security
Patents, trademarks, copyrights, trade secrets and other intellectual property are often vital company assets that need to be protected by agreement, practice and appropriate registrations. In addition, the technology used to market, commercialize, develop and protect intellectual company assets needs to be obtained and maintained on clearly defined terms. At the same time, emerging companies need to ensure that third parties’ information and assets that are entrusted to the company are also protected. Our Emerging Companies team encourages a proactive approach to these issues to minimize competitive and reputational harm, including:
- Properly registering the company’s patents, trademarks and copyrights
- Creating a plan to monitor intellectual property that may infringe the company’s intellectual property
- Defending claims of infringement against the company and prosecuting those who infringe the company’s intellectual property
- Developing practical procedures to protect trade secrets
- Drafting protective technology agreements, including agreements for hosted platforms, software and data solutions, software and data as a service, application development, testing and maintenance, website development agreements, and data center and cloud computing environments
As a business grows and prospers, new issues will arise that are different from those previously encountered:
Venture Capital and Loans
As companies stabilize and grow, they are often presented with opportunities to secure additional capital through venture capital financing but at the price of transferring material ownership percentages to more established, better-funded entities with deeper experience. Our Emerging Companies team helps to balance the playing field with our practical familiarity with these structures and their players. Our team works with the company to ensure that it is capitalizing on the knowledge and experience of the venture capital team without losing the founders’ financial rewards and management authority. Similarly, some companies seek traditional bank debt to fund their operations once they have stabilized, and our team is experienced in not only advising companies regarding the terms of loan transactions but also in helping the companies to build and maintain strong relationships with their lenders.
Business Expansion and Divestiture
As the business evolves, the company may wish to pursue growth through a merger, joint venture, acquisition or plant construction, lease or expansion. Our Emerging Companies team routinely helps companies achieve deliberate growth targets while managing liability. Conversely, an investor or other interested party may seek to acquire the entire business rather than taking on a minority investor role. In these situations, our Emerging Companies team works with the companies’ other advisors to maximize the owners’ value and minimize post-closing liability arising from such issues as securities, antitrust, tax, employment, benefits and environmental issues.
No matter the stage of development or industry, our experienced team of professionals will work cooperatively with the company and its advisors, to develop a cost-appropriate, holistic solution to the business’s legal issues. We welcome an opportunity to meet your team and learn more about your business and its legal issues in a free consultation.