Monday, October 27, 2014

New (and Improved)?

Another week of technology overload:  A new car and upgraded phones have made me long to live in a lighthouse.

I am a relatively simple person. I appreciate all of the wonderful things that can be done with electronics, but I only want what I want–or need–and only when I’m ready for it.  
Take the new car. It passes the basic function test–it is immediately drivable by using a key, as I have done with countless cars before. It has the same basic components–engine, seats, tires, radio. It has lights and windshield wipers. It is the most recent model of what I have been driving for ten years.

So why am I completely thrown off the first time I drive the car and it happens to be dark and raining?  Because car manufacturers can’t leave well-enough alone. Do they think that moving the wiper switches will amuse me? Or that enabling me to tune the radio on the steering wheel is less distracting than dealing with knobs on the dashboard radio?

And what is with the touch screen? First, it tells me that I shouldn’t pay attention to it while driving because that would be distracting. No kidding. I’m not sure that it has a whole lot of use in my driveway or parking ramp either. I don’t want to diagnose a crack in my block, a leaky hose, or whatever else might be wrong with the car (if I can’t figure out the pictures on the photocopy machine telling me where there is a paper jam, I am hardly likely to figure out what to do under the hood). I don’t want to program the temperature in a gajillion different locations. Either I don’t really need to know, or I will roll down the car window when I get there.

I just want to pre-set my radio stations, turn my lights on and off with my ignition, and go from Point A to Point B without the temptation of trying to find directions to the lowest gas price in the next 100 miles.

The phone is much worse. I finally let go of my beloved Blackberry. You laugh, but it was simple, dependable and exactly what I needed. Maybe not everything I wanted from time to time, but everything I really needed.

My new phone–a Samsung Galaxy S5–is a significant upgrade. Or so I’m told. I’m having trouble getting past the initial screen which pops up an Amazon advertisement with each minor touch. I know that with each passing day, I will master a new button or feature and will learn to love the phone. But for now, I’m panicking about whether or not I will ever speak to my husband again (I have no idea what his cell number is and have lost my “frequent calls” list) and desperate to figure out how to change the annoying alarm tune which only heightens my naturally cranky morning disposition. Most importantly, I do not want the app that will tell me that my blood pressure is going up. I know that without being told.

In the midst of this, we adopted a new dog. A one-ish year-old Staffordshire Terrier, commonly known as a pit bull. He looks like Petey of Our Gang/Little Rascals fame, sans the painted circle around his one eye.

“Teddy” is pure sweetness. Within minutes of bringing him home, he charmed our elderly lab with respect and kindness, and held his own with our border collie by letting her win the toy battles. There is a learning curve with this guy–just like with the car and the phone. But while he can raise my blood pressure (such as when destroying his second remote control), he more often brings it down with a mischievous grin, a lick, or the old I’m-not-sure-what-I-did-but-I’m-sorry-anyway stare. He is complex, but not technologically irritating. Best of all, his touch screen is warm and cuddly, and usually produces a wag instead of an annoying beep.

Wednesday, October 15, 2014

Grumpy Old Venture Capitalists

Last week I attended a panel session entitled “Grumpy Old Venture Capitalists” which was hosted by Club Entrepreneur, a local club that hosts semi-monthly lunches for those in the entrepreneurial community. Norm Dann, Andy Greenshields, Richard Perkins, and John Trucano (a.k.a. the Grumpy Old Venture Capitalists (GOVCs) shared stories about their best deals and what they have learned from their investment failures over their past combined 100 years in the venture capital world. The event was extremely well-attended–I mean who could resist learning from venture capitalists who have seen the good, the bad, and the ugly (and I don’t mean the movie)?!?

Several of the questions during the panel session inevitably focused on what the GOVCs look for when determining if they are going to invest in a company. Not surprisingly, the response was unanimous—they look for a company with the right people. They want to see a company comprised of people who are passionate about the company’s product or service and are working non-stop to make the enterprise a success. One panelist added that he’s not going to be impressed if he meets with an executive who has a nice tan or boasts about what a low handicap he or she has. They want to see executives who live and breathe their businesses.

The bottom line: if you’re running a start-up, it better be the focus of your team members’ lives. If you’re an entrepreneur, take a moment to think–do you have the right people in your organization? Does each person contribute something unique to the organization? Do your team members execute their ideas effectively and successfully? It’s the right people that drive innovation and create success. As the GOVCs highlighted, it’s the people that can make or break your company.

Are you willing to bet your company’s future on your current team members?

Wednesday, October 8, 2014


Cybercriminals from Russia hack into a hotel chain’s computer network.  Stolen credit card numbers are sold on websites. Personal information is obtained from a popular restaurant chain. Almost on a weekly basis, we hear of a new data security breach even larger than the last.

This past week, JP Morgan revealed that customer names, addresses, phone numbers, and email addresses for 76 million households had been obtained through unauthorized access to their network. Home Depot confirmed a six-month breach of its payment system that affected at least 53 million credit and debit cards.

How has this affected business? 

Target saw retail sales drop just after the massive data security breach last year.  Costs incurred by Target related to the breach—including the cost of investigating the data breach, providing credit monitoring services to customers, and notifying customers, as well as fees for legal, computer forensics, technology consulting and other professional services—may exceed $148 million. Civil litigation, government investigations, and enforcement proceedings may add to these costs. Target’s stock price took a hit and key Target executives lost their jobs. Clearly, a data security breach can be an expensive lesson for any business.

But what about the customers?  Shoppers have returned to Target. And despite being hit by two of the largest data security breaches ever seen in the retail and banking industries, Home Depot and JP Morgan have not experienced the same negative impact on their stock or retail sales as Target.  

According to the Identity Theft Resource Center, there have already been 579 data breaches within the last year.  Target. Jimmy John’s. PF Chang’s. Neiman Marcus. Michaels. SuperValu. Home Depot. JP Morgan. Consumers may just be tired of hearing, almost on a weekly basis, about the latest and greatest data breach. Chalk it up to data breach fatigue. Here we go again—another massive data breach. 

Consumers may now simply accept these data breaches as unavoidable. And what harm is there to the consumer?  According to the Fair Credit Billing Act, consumers are not on the hook for fraudulent charges or liable for unauthorized purchases made with a stolen credit card. Throw in the free credit monitoring services offered by businesses affected by breaches and consumer response may be like the old Alfred E. Neuman adage: “What, Me Worry?“

So if you are a consumer, get ready for the next big data breach, but check out those sales and shop where you get the best deals. If you run a business, make sure that you are prepared: you must still take these data breach and security threats very seriously. They can be very costly. Just ask Target. 

For guidance on how a business can prepare for a data breach, read pages 121-138 in A Legal Guide to Privacy and Data Security.

Thursday, October 2, 2014

What’s New in Town?

In my younger years, my parents always encouraged me to try new things, such as sports and after-school clubs. Although I resisted at first, eventually it became somewhat addicting.  Now, aside from bungee jumping and skydiving, I’ll try almost anything. In the past year, I’ve discovered just a few pretty cool things to do in the Minneapolis area: 

FootGolf. Rumor has it Tiger Woods’ fall from greatness has caused golf to suffer: Courses struggle to fill tee times, and the sport isn’t gaining popularity among younger generations. For a while, glow golf (nighttime golf with an illuminated ball) and snow golf (played with a 6 iron and a tennis ball) was all the rage. However, the newest craze is FootGolf, which is a combination of golf and soccer. Until this past summer, I hadn’t even heard of the sport; now, no doubt in big part to the 2014 World Cup, there are 10 FootGolf courses in the state, and I’ve played three of the eight in the metro area. It’s played on a golf course, where you kick off from a tee box and attempt to get the soccer ball in a 21-inch diameter cup using the fewest number of kicks. It’s a great sport for both children and adults, and it’s a nice little moneymaker for a golf course: Prices run around $1 per hole, per golfer, and soccer balls rent from $3 to $5.    

WhirlyballWhirlyball is probably one of the most unique activities there is. The facility is in Maple Grove, where you play inside a converted movie theater. It contains two enclosed basketball-like courts with an elevated backboard at each end. Players (five per team) drive their WhirlyBugs, aka bumper cars, while simultaneously using scoops to pass a whiffle ball amongst teammates and attempting to score points by tossing the whiffle ball onto the elevated backboard. Essentially, it’s a combination of basketball, lacrosse, hockey, and bumper cars, and it’s incredibly fun. And, with the maximum speed of a WhirlyBug reaching 3-4 mph, there’s little risk of injury. It’s become so popular that courts book up months in advance, and they now offer leagues. It runs about $20 per person. We’re hosting a Whirlyball event next month for some of our entrepreneurial clients so (if you’re smart enough to be one of those) look for an invite soon!

EscapeMSP. The other day, fellow entreVIEW contributing author Dan Tenenbaum came by to tell me about a new activity he had recently tried. When the first words out of his mouth were, “You’re locked in a room for 60 minutes with up to 10 other people…,” I was very skeptical. Why would I voluntarily pay someone to lock me in a room with people I may not know for an entire hour?! But, as he went on to explain, I quickly became intrigued. Escape MSP takes four to 10 people and locks them in a fully themed room with the goals of (1) collecting a hidden asset and (2) escaping the room before the time expires. The current “mission” tasks players with “gathering incriminating evidence from the office of Mr. Dupree, an international businessman, prior to his return.” These entrepreneurs developed a profitable venture: At $30 per person, it’s on the spendy side, but discounted tickets are available if you look in the right places. 

Next up on my list, after EscapeMSP?  Well, I hear there’s a snow golf tournament in Wayzata in the winter….

Thursday, September 25, 2014

What: Professor X, In the Basement of the Ivory Tower: Confessions of an Accidental Academic (Viking, 2011)

Why: Qualification inflation is rampant. On a purely utilitarian basis, are we forcing people to obtain costly postsecondary qualifications that are unnecessary for the tasks they perform? 

Readers of my posts will know that I am a fan of David Brooks, whose writings I have come to admire notwithstanding certain differences in political outlook. Close friends will also know the great influence my father’s views on education have had on me and the course of my life. Let’s just say he saw education as the key to unlocking potential, a world view he successfully imprinted on his children.

So, when I saw that David Brooks had awarded a Sidney Award to Professor X for an essay on higher education that appeared in The Atlantic a few years ago, I made a mental note to track the piece down. Later, to my delight (sometimes it doesn’t take much to delight me), I found that it had been expanded into this book. Cracking it open, I immediately discovered why this was published under a pseudonym.  

Professor X has the somewhat controversial opinion that too many people who do not belong in college and don’t need a college education to do what they do are being told they need to get a sheepskin. They are incurring huge amounts of debt (in excess of $1.2 trillion) in what for many of them has become a failing enterprise.

Professor X tells us there is a social disconnect here. He identifies, as a typically American trait, the use of a meat-axe where a scalpel would serve nicely:

                    The United States of America does a few things extremely well. It is
                    unmatched at completing a certain species of task requiring a relentless 
                    approach….We’re not the best at figuring out why we’re doing any 
                    particular task, but we are a people who can get stuff done….
                    We are, if nothing else, thorough.

We have, he suggests, been much too thorough in pushing people into postsecondary education and in requiring qualifications for occupations that may be gainfully pursued without an education unrelated to the tasks at hand.

I personally believe that education is its own reward, and that education can lead to the discovery of potential that might otherwise remain untapped, but on a purely utilitarian level Professor X makes an important point—one that I suspect most entrepreneurs know or soon discover as they pursue their dreams.

Think of Bill Gates dropping out of Harvard to build what has become the leviathan we know as Microsoft. He learned what he needed, but knew that a liberal arts degree wasn’t necessary for him to achieve his vision. And that, at the end of the day, is the conclusion Professor X reaches: “Let’s start judging based on skills and experiences and talent, and save failing students from a mountain of unnecessary debt.”

Wednesday, September 24, 2014

Estate Planning Tips from the Loss of a Hollywood Icon

A very notable woman in the entertainment industry (other than Joan Rivers) passed away recently—Lauren Bacall. Lauren, born Betty Joan Perske, left a true legacy in the entertainment world, as well as a couple of good reminders for those of us crafting our own estate plans. 

Lauren Bacall was the famous co-star and eventual wife of Humphrey Bogart, and she died this August at age 89. Lauren left an approximate estate of $26.6 million.  Of the $26.6 million, about $10 million represents the value of her apartment on the Upper West Side of New York City.  There is about $1 million of personal property and only $100,000 of cash. Lauren also possessed a general power of appointment over the trust that Humphrey Bogart left for her.

Lauren presumably died a New York resident, so there will be both federal and New York state estate taxes due on her estate value and the value of the trust. With only $100,000 of cash, her estate has a serious liquidity problem.

Her will directs that the real estate be sold, but depending on the market and other factors, that might not be practical. Her estate has nine months from the date of her death to pay any estate taxes.  The chances that there will be a closing on a $10 million property within nine months are pretty remote, and it will likely cost more than $100,000 to maintain a property of that size until it is sold.

What about the other assets? Lauren asked in her will  that her personal effects, letters, and memorabilia not be sold. This may be some very valuable property that (assuming the family is willing to part with some of it) the estate could use to pay taxes.

Anything else? Well, Lauren gave the rights to her “likeness” and other intellectual property to her children. If this property is valued anything like the similar property owned by the estates of Marilyn MonroeMichael Jackson, or Elvis, its value is fairly significant.  And the IRS can argue they are owed taxes based on that significant value, even though the family hasn’t yet begun to profit from any of it. Even if valuation isn’t a problem, issues relating to whether and how the estate markets her likeness or how the estate divides royalties and other proceeds can leave families in litigation for years.

These two major issues—illiquidity and problems arising out of the management of valuable intellectual property—can be headed off by a carefully crafted estate plan.

Usually life insurance is the simplest way to assure there is a bucket of liquid assets available to pay taxes and other expenses, and it is also possible to borrow against illiquid assets (such as Lauren’s apartment) to pay expenses. These are relatively simple solutions that usually do not otherwise disrupt the plan.

As for the management of future profits from her likeness, a family entity or trust might be created to hold and manage the assets in order to avoid conflict and govern decisions regarding the use of the assets going forward. A family can agree to put this in place after the fact, but many individuals in similar circumstances choose to establish the entity, select the ownership interests and associated rights (think voting and non-voting shares, for example), and perhaps even a board of directors outside the family to make decisions.

Friday, September 19, 2014

The parade of NDAs

Non-disclosure agreements have been a regular part of my practice because so many of my clients have technology at the core of their businesses. Lately, however, it seems like I’ve been dealing almost daily with clients who are haggling over NDAs. Maybe it’s a sign that the entrepreneurs I work with are in an active state of deal making and wanting to engage in other strategic conversations – or maybe it’s just a sign of increased paranoia!

The interesting thing about this trend in my inbox is that it runs counter to a broader trend. A decade ago (or more, at the risk of showing my age), NDAs between entrepreneurs and potential investors weren’t that unusual. Today, in Silicon Valley and elsewhere, many (if not most) sophisticated investors refuse to sign them. 

While it is unusual for an investor to steal an entrepreneur’s idea (although allegations of theft are sometimes made) and the anti-NDA trend may not be ideal for individuals trying to protect their trade secrets, it is a reality they face. Investors claim they don’t want to expose themselves to potential risks because they may see “related” deals; they also claim that the lawyers (why does everyone always blame the lawyers?) get in the way and stall the dealmaking.

So what’s an entrepreneur to do? Well, you can’t just clam up and not talk about what you’re up to. You need to figure out how to talk about your business, the opportunity, and your technology. It’s about finding a way to talk about what’s interesting about the business and the opportunity without revealing the “secret sauce” that you’ve got.

Finally, remember that potential partners and investors are likely more interested in you and your team than they are in your idea. I’m not claiming as some do that your ideas have no value, but I do think that most investors are concerned more about the team and the “execution risk” than they are about the idea.

A decent idea with a great team is always a better investment than the best idea ever with an average team.