Working with Professionals

I just returned (barely avoiding the wrath of the “Frankenstorm,” Hurricane Sandy) from an extended weekend in Washington, D. C., where I was pursuing my avocation—my musical adaptation of the children’s book, “Pickle-Chiffon Pie.” The weekend involved more than three days of rehearsals with eight professional actors and other theater professionals (a director and musical director/arranger), culminating with a staged reading for an audience at the Adventure Theatre-MTC in Glen Echo, Maryland.

More than two-thirds of the way through about 15 hours of rehearsals, my primary collaborator on the project and I started to wonder how on earth these people were going to manage to digest our complex score (the handiwork of our brilliant arranger, Bill Yanesh) in such a short period of time. It clocks in at 153 pages of music with several group songs involving between three and seven separate vocal parts.

I didn’t try to learn the script and sing the score myself (something for which the audience is undoubtedly eternally grateful.) I left it to the professionals. Why? Because they are professionals. They know their craft and are amazingly skilled at it. The reading was, by any measure, a success, with tremendously favorable feedback from the audience! While I think the music, lyrics, and script we created are terrific, nobody would have noticed if it hadn’t been for the hard work, dedication, and professionalism of those involved.

Too often, entrepreneurial clients fail to trust that their professional advisors (including lawyers) know best how to do their jobs. Entrepreneurs think they can save a few bucks by doing something themselves that they really aren’t trained to do. We often receive a “draft” document to review based on some form the client found on the Internet—which invariably takes more time to review and fix than just starting with the right foundation in the first place. Other times, we end up spending more time trying to unwind something done in an incorrect or unusual way than it would have taken us to do it right in the first place, had we been involved.

If entrepreneurial clients would trust the skill and business sense of their professional advisors, it would inevitably make life a lot easier for everyone involved and increase the likelihood of success for the enterprise. 

Sequestration Looming (Part II)

In a prior post, I wrote about the pending impact of sequestration on the defense industry. Since then, sequestration has drawn increased attention, including some confusing references during the third presidential debate. The potentially devastating effect of sequestration is now becoming apparent.
 
As I mentioned in my earlier post, October 1 was the deadline for the 90-day notice some states require under circumstances covered by the federal Worker Adjustment Retraining Notification Act (“WARN”) Act.  The WARN Act requires companies with more than 100 employees to give 60 days’ advance notice of mass layoffs or plant closures. Many defense contractors, however, have ended up backing off from issuing such notices because of uncertainty as to what the sequestration bill passed earlier this year actually requires. 

Following passage of this bill, the White House issued a memo directing contractors to follow the guidance of the Labor Department, which, in a July letter, said the WARN Act does not require contractors facing sequestration to send layoff notices to their workers. And the Office of Management and Budget stated in September that the government would pay for related legal costs incurred by companies that follow the Labor Department’s advice.

Based on this, many of the largest federal contractors have concluded that they will not send out WARN Act notices “unless they get more details about how sequestration—the dramatic cuts that will take effect in January if lawmakers don’t agree on an alternative long-term budget plan—would affect them.”   

The net result? No one seems to be sure, but one thing is clear. If Congress does not act, sequestration, as currently contemplated, will take effect as soon as 2013 rolls around, and the WARN Act notice requirement will also kick in for many companies based on known and immediate cuts that will result in layoffs. What is also likely is that companies subject to these requirements that have followed Labor Department guidance but nonetheless find themselves to be noncompliant with WARN Act requirements will be looking to the government (read: taxpayers) to cover their costs of noncompliance.

Where does this leave the second tier of government contractors—vendors and service providers? Even further in the dark and possibly facing sudden project cancellations (and the ripple effect of that is potentially huge). Stay tuned.

If Only I Had Invested In …………?

Did you ever dream of coming up with the next big idea? Ever wish you owned the intellectual property associated with Apple, Microsoft, Google, Facebook, or any number of other successful business ventures? What about early opportunities to invest in such revolutionary and industry changing companies?

You may have your own personal stories about missed opportunities, of investment decisions that could have led to early retirement.

Here is mine.

While a graduate student at the University of Rochester in the early 1950s, my father, Gabe Cohen, became friendly with a young lawyer by the name of Sol Linowitz. Sol had just come back from a trip to Columbus, Ohio, where he had seen a unique demonstration by scientists at the Battelle Memorial Institute. The demonstration involved shining light through a transparent ruler at a metal plate that had been rubbed with cat fur and sprinkled with powder. A piece of paper was then held against the plate and, when lifted up, the paper revealed a smudge. This primitive light bulb experiment led to electrophotography, which eventually became known as xerography.

Sol offered my father the opportunity to invest a few thousand dollars and get in on the ground floor of this new business opportunity. After consulting with my grandfather, my father decided to pass on the offer to invest any money in this fledgling venture based on shining a light bulb through a ruler at a metal plate rubbed with cat fur. Better that my father concentrate on his studies and young family.

In 1959, the Haloid-Xerox company, started by Sol Linowitz and Joe Wilson, sold its very first copy machine. This small Rochester-based company quickly grew to become Xerox—a major international corporation with annual revenues in the hundreds of millions of dollars.

What would have happened if my father had made that initial investment? Would his life have been any different? What about mine? To be honest, I am not sure how much of this story is Cohen family folklore, but it is still fun to think about what might have been.

The questions are: Would you have invested money in Sol’s business venture based solely on the cat fur demo? What considerations should you make before investing in an untested and risky new business venture?

I am not aware of any magic formula that can help you determine when a brand-new untested idea or business venture will prove successful. I will, however, suggest that when you proceed with caution when presented such an investment opportunity. Only invest an amount of money that you can afford to lose and conduct a thorough investigation of both the person making the offer and the potential of the venture. If you are fortunate enough to be able to gamble without sacrificing your personal resources or your family’s finances, go for the cat fur! And, good luck!

Baumgartner’s Amazing Feat

Is there anyone who hasn’t yet read or heard about the remarkable feat Felix Baumgartner accomplished last weekend?

On Sunday, he rode a capsule, attached to a hot air balloon, 128,100 feet (about 24 miles) up above Earth, then jumped from the capsule falling all the way back down to a desert in New Mexico. On his way down, he broke the speed of sound, travelling an estimated 833.9 miles per hour. His fall to Earth lasted a little over nine minutes, with half of that spent in free fall. He broke the records for highest free fall and highest manned balloon flight. He did not, however, break the record for longest free fall, which amazingly was set in 1960 by Colonel Joe Kittinger.

When I heard about this, my first thought was, why in the world would anyone do that? As someone who gets pretty uncomfortable riding chair lifts, I would find it almost paralyzing to travel that far up in the sky in a small enclosed capsule, let alone open the hatch and jump back toward Earth. I am awed, and a little perplexed, by people as fearless as Mr. Baumgartner. And while his feat struck me as cool, it seemed to be another one of those stunts like this that is interesting but has no other real redeeming value (other than getting your name in the Guinness Book of Records).

However, as I read more about Mr. Baumgartner’s feat, and what it took to accomplish it, I’ve gained more admiration for him. It wasn’t just one guy going up really high into space, and defying death by falling safely back to Earth. He had a large team, including Col. Kittinger, helping him prepare for this. If you look at the footage of the jump, his team on the ground appears to be in a NASA command center (although NASA was not involved). The planning for this feat took over five years, with countless hours preparing and studying for the ultimate event, including two significant test jumps in the past year.

Apart from being a cool daredevil stunt, this could also have lasting and important impacts on future space travel. Researchers believe that they gained valuable data about the effects of high speed travel on the human body, which will help in creating emergency escape plans for astronauts and other space travelers (companies like Virgin Galactic are developing plans and vehicles for space tourism). They also expect that this will help in developing new and better spacesuits.

There are lots of lessons to be learned from this. A couple though, stood out to me as particularly applicable to an entrepreneurial audience. The traits and characteristics that allowed Mr. Baumgartner to make this remarkable journey are similar to those that it takes to succeed in a number of other settings, including starting and running a business. He had the vision and foresight to set an almost impossible goal, and the courage to try to accomplish it, despite all the inherent risks. He surrounded himself with a skilled team, including a mentor (Mr. Kittinger) who had achieved a similar goal many years earlier, and who remained vested in Mr. Baumgartner’s success. He took the time necessary to prepare and plan for his adventure. He also was able to get the right partners to help sponsor and underwrite the cost for this undoubtedly expensive endeavor.

Mr. Baumgartner had vision, courage, preparation, planning, and funding, plus the support of a mentor and a strong team. Do you know any successful entrepreneur who hasn’t?

Debate Skills Matter for Entrepreneurs

Whether you’re a die-hard Republican or Democrat, somewhere in between, or don’t actually care much about politics, you have probably run into at least some kind of commentary about the recent presidential and vice presidential debates. Maybe it was about President Obama’s “lackluster” and “unconvincing” first performance, or the “confused and bored” audiences. It could have also been about Vice President Biden’s “nonverbals” or, if you’re someone who still watches SNL, Paul Ryan’s “shark eyes.”

No matter where you find yourself on the political spectrum (and even if you never want to run for public office), if you’re an entrepreneur, there are valuable lessons to be learned from the debate strategies and tactics of our presidential hopefuls. In fact, in reading through this insightful article on how debate skills can and should apply at one’s “home, school, and work,” I couldn’t help but think about the many ways debate lessons would also help budding entrepreneurs.

As Woodsome notes in her article on Voice of America, “being prepared” and “knowing your audience” are two of the most important attributes of a successful debater. This is often the same advice we give to entrepreneurs who may be meeting with potential investors or strategic partners.

It is crucial to be prepared at any discussion or meeting to explain in a clear and convincing way what it is you are looking for, and why the other party should give it to you. Many entrepreneurs can discuss the nuances and technicalities of their ideas for hours, but conveying a concise, exciting pitch – and actually asking for the business or investment – is much harder to do (note the relentless request of debate moderators to the candidates to stick to the question at hand and give a relevant answer). Honing this skill requires practice and preparation, both in understanding your own business and goals and those of the other side. Mastering your side of the debate, if you will, automatically makes you a more credible and convincing presence.

Your opponent, or in this case potential partner or investor, will also inevitably have tough questions or push back. It’s crucial to your success to not only anticipate these questions, but to have prepared and well-thought-out responses.

If you know that there is a weak point in your business strategy, or a strong and well-recognized potential business competitor, don’t just hope that question won’t be asked. Think about the hardest variations of the question and plan out your responses – or even consider preempting the question by including the pain point and how you plan to overcome it in your initial pitch or presentation. And as Woodsome notes, be sure to listen closely. If an inquiry is made for which you didn’t prepare, don’t just attempt to fit a stock answer to the question. Take a moment to analyze what the true concern appears to be, and respond accordingly.  

Last, remember that your audience will ultimately always want to know what’s in it for them. They are making a choice as to where to spend their “investment” – whether it is a vote, time, reputation, or money – and they want to be excited about the choice and convinced it is the right one for them. Satisfying the person on the other side of the table that your interests are aligned with theirs will be the overriding factor in whether or not they ultimately decide that you are their candidate.

A Post by Karen Wenzel, Guest Blogger

Some Quick Observations from a Trip to Silicon Valley

I just returned late last night from a whirlwind three-day trip to Silicon Valley.  Thanks to my friend, Frank Vargas (a colleague and fellow entreVIEW author who, as regular readers know, currently lives in Mountain View), I was able to meet several angels, VCs, and entrepreneurs in places like Palo Alto, Mountain View, Menlo Park, and San Francisco.

While sitting in my window seat on the flight home (next to a guy fittingly reading the Steve Jobs biography on his iMac), I had time to reflect on my trip and make the following observations: 

• Apparently, nobody told the folks in SV that we’re in a recessionary economy with a lousy housing market and that the rest of the state of California is teetering on the edge of bankruptcy.

• Maybe it’s the Stanford vibe or the sunny high in the 60’s every day in the Bay area, but there’s so much energy and activity that it’s palpable.  Hanging out at University Cafe mid-morning on a Wednesday, there were about a dozen entrepreneurs meeting to either pitch or strategize their latest ventures.

• Housing (and rental) prices are rising rapidly—I understand that single home sellers often end up getting 120% (or more) of their listing price because of bidding wars.  I guess that’s what happens when you’ve so many “new” millionaires (at least on paper) because of recent IPO activity.

• While underwhelming performance of Facebook stock in the public market may have made some investors cool a bit to social media deals, the interest in tech, infrastructure, healthcare, and other industries remains strong.

Bottom line, I’m sure glad that we’ve got feet on the street out there and, like another friend, colleague, and fellow entreVIEW author, Kermit Nash (who has been out there a few times already this year), I look forward to going back to soak up some of that energy (and sunshine) and make connections likely to be valuable to people I know.

Red Soles Redux

Remember the earlier blog about the lawsuit brought by shoe designer Christian Louboutin against Yves Saint Laurent for infringement of Louboutin’s red sole?  Despite Louboutin’s U.S. trademark registration for its red sole, and substantial evidence that the red sole had gained secondary meaning, Louboutin was denied a preliminary injunction against YSL last year that would have prevented YSL from continuing to sell four styles of red-soled shoes.  In denying the injunction, the lower court judge ruled that Louboutin was unlikely to win the infringement case on the merits as its trademark claims were overly broad.  Louboutin immediately appealed this decision and in early September, the 2nd Circuit Court of Appeals found that Louboutin does have valid trademark rights in its red soles, when those red soles contrast with the color of the rest of the shoes.  That’s a win for Louboutin, right?  Yes.  Sort of.

The validation of Louboutin’s trademark rights is absolutely a win.  But it’s also a win for YSL as the four styles of shoes that it sells with red soles also have red uppers.  So we have two winners – for now.  Louboutin keeps its trademark – with limitations – and YSL continues to sell its red shoes with red soles.  The case now goes back to the lower court for review and consideration of some YSL counterclaims that were not part of the earlier decision and appeal. 

While Louboutin is having some luck with its trademark in the United States, it was not so fortunate in a similar lawsuit it brought in France against Zara, a successful “fast fashion” Spanish clothing and accessories retailer.  (“Fast fashion” is a term that refers to retailers that move designs quickly to stores for the mainstream consumers.)  About the same time that Louboutin brought its infringement suit against YSL, it also tried to prevent Zara from selling a red-soled shoe, on the grounds that the Zara shoe (selling for $70) might create consumer confusion with the Louboutin shoes (a bargain at 10 times the Zara price).  The European Union, and France in particular, has generally been more favorable for protecting fashion, so it’s not surprising that the French judge initially favored Louboutin in its case against Zara.  But ultimately, Zara was persuasive and the  court decided that Louboutin’s trademark registration for red soles was too vague, and even suggested that Louboutin should specify a Pantone number for its particular red.  That decision was upheld on appeal, and although Louboutin was required to pay a modest amount to Zara (about $3,600 U.S.), the real cost to Louboutin is the potentially weakened nature of its trademark.

While I am not so certain about the legal analysis supporting these various decisions, I admit that the results coming out of this messiness actually make sense.  The fact is that the red sole of the Louboutin shoes is recognized for its source, and that is a primary function of a trademark.  At the same time, no one wants to allow broad color monopolies, particularly in fashion where color serves other purposes. Although we don’t yet know the final court decision in the U.S., I suspect it will follow the appellate ruling and confirm Louboutin’s trademark rights in the red sole, but appease the fashion world by excluding monochromatic shoes. To watch for, however, is whether the U.S. court will go further and prescribe a particular Pantone number for the Louboutin red (doubtful), or at least suggest that Louboutin’s trademark rights are limited to its current signature red lacquer.

I was a Potato Oligarch: Travels & Travails in the New Russia

The Book: I was a Potato Oligarch: Travels & Travails in the New Russia, by John Mole (Nicholas Brealey Publishing, 2008).

Why You Should Care: An illuminating case study about the creation of a new fast food franchise concept in post-Soviet Russia; this book highlights the importance of adequate commercial law foundations to the development of new ventures.

Last month, my stroll down memory lane took me to the former Soviet Union via a book that, from a macroeconomic perspective, toured the lawless chaos that is the modern Russian economy. No sooner had I put the finishing touches on my post than I stumbled across another book that covered some of the same ground, but from where the rubber meets the road.

Being a devotee of eclecticism, I thought twice about writing again so soon about the same general subject matter. But then again, it is no secret (nor would we want it to be) that Gray Plant Mooty is a global player in the franchise law arena. To quote a catch phrase from a 1960s TV Western (and, as usual, to date myself), “No brag, just fact.” So what could be more appropriate than to follow up a review of a somewhat conceptual book about the development of capitalism in Russia, with the memoirs of an Englishman who decides to create a new fast food franchise concept in Russia?

Many entreVIEW readers will identify with John Mole as he works through problems relating to supply, employment, finance, intellectual property and the like, all with sometimes surprising Russian twists. Suffice it to say that American entrepreneurs who are frustrated with legal impediments to building their dreams, may well rethink things after they read about the difficulties of building a new business in a society where there are no legal foundations.

A Cautionary Note to Packer Fans—Don’t Protest Too Much (no, really, I mean it…)

“Thou dost protest too much me thinks….”

This often misquoted line from Shakespeare’s Hamlet (Act III, Scene II) invokes thoughts of an over-the-top protest that not only goes too far, but could lead a passive observer to think that the one protesting actually believes the opposite. Today, we use it as a cautionary phrase to warn someone from protesting too much and too passionately lest there be a penalty associated with the protest.

Case in point: the now infamous final play of the Green Bay Packers game against the Seattle Seahawks, which resulted in a controversial Seahawks victory determined by “replacement referees” (shudder…), set off a storm of protest from fans and players not seen since perhaps the Soviets were given extra time on the clock (and extra in-bounds plays) during the men’s gold medal basketball game at the ’72 Olympics. The day following the Packers/Seahawks game, the NFL ruled that the officiating team’s call on the field was correct, as the replay was inconclusive to overturn the determination of the touchdown. This ruling is almost certain to result in a storm of further protests, but about this let me extend a word of caution to my Green Bay-backing friends, especially those who are owners—YES, owners[1].

Green Bay Packers, Inc. has been a publicly owned, nonprofit corporation since August 18, 1923, when the original articles of incorporation were filed with Wisconsin’s secretary of state. Fans have supported the team financially through five stock sales, in 1923, 1935, 1950, 1997 and 2011. The Green Bay Packers’ fifth stock offering, which ended February 29, 2012, added more than 250,000 new shareholders. More than 268,000 shares were sold during the offering that began December 6, 2011, bringing the total number of stockholders to over 360,000. In short, there are a LOT of Green Bay Packer-Backers in Wisconsin and many lurking among us leading apparently ordinary lives. However, many of these fans are not your ordinary run-of-the-mill fans; these fans own the Packers.

According to the Green Bay Packers, Inc. Common Stock Offering Document dated November 29, 2011 (by which 880,000 shares were offered for sale at $850 per share), there are numerous restrictions on the nonprofit stock itself as well as the owners of the stock. Most notably, the Offering Document has a subtle entry prohibiting owners of the stock from violating NFL Rules. For example:

“’NFL Rules’ -The NFL Rules prohibit conduct by shareholders of NFL member clubs that is detrimental to the NFL, including, among other things… publicly criticizing any NFL member club or its management, employees or coaches or any football official employed by the NFL. If the Commissioner of the NFL (the “Commissioner”) decides that a shareholder of an NFL member club has been guilty of conduct detrimental to the welfare of the NFL then, among other things, the Commissioner has the authority to fine such shareholder in an amount not in excess of $500,000 and/or require such shareholder to sell his or her stock." (Emphasis added)

If the Commissioner requires a shareholder to sell his or her stock, then the Corporation may have a right to repurchase the stock at $0.025 per share. These provisions are right out of the National Football League bylaws for shareholders (Section 9.1(c)(4), under “Conflicting Interests and Prohibitions”), which states that shareholders may not “[p]ublicly criticize any member club or its management, personnel, employees, or coaches and/or any football official employed by the League. All complaints or criticism in respect to the foregoing shall be made to the Commissioner only and shall not be publicized directly or indirectly…”

For many Packer shareholders with whom I have spoken, this prohibition and the remedy for its breach come as a complete shock. Does it quell the rage from the “Battle in Seattle?” No. Is there a legally binding contract between the League and its owners? It appears so. Is there a legally binding contract between the Green Bay Packers and its owners? Yes. Will the Commissioner’s office be sending certified letters to Green Bay owners with Twitter accounts, Facebook pages and blogs that are “criticizing” football officials employed by the league? I don’t know. But it does bring one thing to mind. No team in the NFL has a more passionate fan base than the Packers. Maybe it’s because they “own their team.” Also, there is no more emphatic fan base that loves talking about the “Glory Years” more and the cheeseheads will never cease to pour praise and adulation on past seasons, past plays and former players who ascend to a green and yellow pantheon of semi-deities. Perhaps the specific rules mentioned above explain why Packer fans are the most nostalgic fans in the NFL because they have to be.

Packer fans—you’ve been warned.

[1] Author's footnote: I am not from Wisconsin. Nor am I from Minnesota, where—amazingly—a fair number of Green and Yellow fans reside. The Green Bay Packers are not my home team and the prospect of cheering for them is no more appealing than that of cheering for a successful flu shot.