Thursday, December 19, 2013

Free Money for Minnesota Entrepreneurs?!

For avid readers of entreVIEW (and who isn’t?), the new Angel Loan Program launched by State of Minnesota Department of Employment and Economic Development (DEED) isn’t completely new news. In fact, my fellow author, Dan Tenenbaum, just recently posted about it here. For those who may have missed that post in the holiday rush or who didn’t pay close attention, we want to repeat: the new Angel Loan Program could be as good as a free lunch!

The program, which will issue interest-free loans of up to $250,000 to eligible Minnesota startup companies, was created to help entrepreneurs with startup costs, working capital, business acquisitions and expansions, franchise financing, and equipment loans.

This Angel Loan Fund Program is available to businesses with fewer than 500 employees and who are certified to participate in Minnesota’s Angel Tax Credit Program. The program provides for 10% of the total amount of equity investment received in the business’ approved funding round. And, only one loan may be issued to each business for the duration of the program. In addition, at least one equity investment must be made by an investor that is both certified by the MN Angel Tax Credit Program and qualified as an Accredited Investor per the U.S. SEC under Rule 501 of Regulation D. The loans have a seven-year term, zero percent interest, and are non-recourse. Here are more details on the application process.

The Angel Loan Fund Program is in addition to the well-known Angel Tax Credit program which we have regularly written about. (Dan, could this be the last post to mention the Angel Tax Credit for 2013?) The Angel Tax Credit Program has distributed over $137 million to startup companies around Minnesota since 2010 and it is certain that the Angel Loan Fund Program will be just as successful.

So, what are you waiting for?! Get your free lunch!

Monday, December 16, 2013

What: David Brooks, The Social Animal: The Hidden Sources of Love, Character and Achievement (New York: Random House, 2011)

Why:  An insightful tour through the modern human psyche.

From time to time, I’ve been known to circle back to certain authors whose work I find especially interesting or thought-provoking. Malcolm Gladwell, whose writings I’ve reviewed herehere and here, is certainly on the list, as is—despite my own decidedly middle-of-the-road political leanings—George Will, whose observations regarding our national sport overshadow his more doctrinaire works, at least in my humble opinion.

And then there’s David Brooks, a guy who has been labeled “the liberals’ favorite conservative.” I’m not sure why this should be true, except that some of the things he thinks and writes about touch on basic questions regarding the human condition, and not just on the free market or who should be the next Republican nominee for this or that office.  

In an earlier book review, I described how Brooks took on the job of producing a profile of a meritocratic class with which all of us are familiar, in many cases quite intimately. In The Social Animal, Brooks takes on the question of what makes people tick. An alternative subtitle to this book might have been “David Brooks Explains Life.”

Explain it he does, tapping into the newest biological, psychological and sociological studies. The bottom line? “The central evolutionary truth,” according to Brooks, “is that the unconscious matters most.” What goes on beneath the level of conscious thought has a staggeringly important impact on how we live our lives. Just one example: “People are instinctively drawn to the familiar,” which explains why people named Denise or Dennis are disproportionately likely to be dentists, just as you might be drawn to a legal career if you’re named Lawrence or Laurie (or Lori). “These are some of the most important choices in people’s lives,” says Brooks, “and they are influenced, if only a bit, by the sound of the name they happen to be given at birth and the attraction to the familiar.”

Anyone know an entrepreneur named Andre(w), or maybe Buck or Max?  Maybe even someone who has two “money” names like "Cash and Penny"?  Maybe it isn’t just a coincidence…. 

Monday, December 9, 2013

ObamaCare Website – A Case of Déja Vu

The ObamaCare website fiasco brings back memories of my role as primary legal counsel for another massive government information technology project involving extremely complex technical issues and a hypersensitive political backdrop.

In 1987, as a Special Assistant Attorney General for the State of Minnesota, I was responsible for technology procurement. The federal government was willing to pick up 90% of the costs incurred by the state to automate the delivery of federal programs such as Medicaid and food stamps.

My client, the Minnesota Department of Health and Human Services, used this federal money to integrate the many disparate computer systems across the state being used to deliver federal programs.  The 87 counties in Minnesota used a variety of systems involving multiple staffs and government agencies. There were political agendas and technical issues to overcome.  The end result—a fully functional and integrated system—required extensive planning and a significant commitment of financial and human resources before any productive use or “go live” date of the system. Following the successful completion of this project for MDHS, I was invited by the Federal Department of Health and Human Services to conduct a workshop for federal procurement staff on technology contracts.

As legal advisor, my primary role was to guide MDHS through the procurement process. This included preparation of the RFP, vendor review and selection, and contract drafting and negotiation. If you have read our Legal Guide to  Technology Transactions or attended one of our workshops, you will see the special consideration given to these types of projects and related agreements. In addition to essential warranties, remedies, indemnities, termination rights and other critical contract provisions, these projects demand extensive project planning with frequent testing to assure that the technology performs in accordance with the agreed upon requirements and specifications.

What did I learn during that process of integrating the 87 Minnesota county computer systems? First and foremost, make sure that you have experienced technical and legal personnel familiar with IT projects. You have to get the parties involved early to focus on exactly what they want to accomplish. What will a fully functional system look like when it is completed? Set performance milestones. Establish acceptance criteria. Test all modules.  Reserve payment until final acceptance.  Determine a completion schedule.  All of these issues should be covered in the related vendor agreements.  One thing is certain: You can almost guarantee that problems will arise during and after implementation of any IT project.

No matter what your political views may be related to ObamaCare, the need for the government website to be fully functional is imperative to allow for the enrollment of individuals in health insurance programs. And, from a lawyer who has been there, I hope the lawyers working with the technical staff did a good job when negotiating the vendor agreements.

Wednesday, December 4, 2013

Just When You Thought We Had Nothing Left to Say About MN Angel Tax Credit…

As frequent readers of entreVIEW know, we regularly write about the Minnesota Department of Employment and Economic Development’s (DEED) Angel Tax Credit program. Many of us help clients understand and qualify for the credits.  

Just before Thanksgiving, Karen Wenzel told readers that DEED is now accepting applications for eligibility in 2014. Of course, that doesn't mean that angels can get any credits before January of next year.  Max Bremer told us way back in May that credits had run out for the year.

So what could I possibly have left to write about now?

Just Monday, we hosted a meeting of key constituencies who have an interest in the program, including angels, attorneys and other business leaders, people from DEED and a couple key legislative leaders. In addition to discussing the future of the program (currently set to expire at the end of next year), I also learned about DEED’s new “Angel Loan Fund Program.”

Details about the program can be found on the “Angel Loan Fund” tab on this page. The program, which just officially launched early this week, permits businesses that have previously been certified for the Angel Tax Credit to receive a non-recourse, interest free loan with repayment of principal in a lump sum at the end of a seven-year term.  The loan is limited to the lesser of $250,000 or 10% of new equity capital raised after enrollment in the Loan Program.

For qualified businesses planning to raise additional equity capital, it looks like a great way to obtain “free” money.  OK, it may not be quite as free as the money Serge Vorobyov tossed down on people at the Mall of America on Black Friday, but it still looks like a good deal for eligible businesses.

Is it possible that this is our last entreVIEW post on the Angel Tax Credit for 2013?  You’ll have to keep reading to find out!

Tuesday, December 3, 2013

Holiday Estate Plan Makeovers

This time of year can be full of family, food, and good fortune; it can sometimes be full of good and bad change too. I am often busy this time of year because people are home for the Holidays and thinking about their financial and family health—but sometimes I am busy because of illness and tragedy. I thought this post might be a good “end of the year” checklist of things to think about and when to update your estate plans:
  • Incapacity. Unfortunately this is a time of accidents (think Clark Griswold), or unexpected illness, and every single person should have documents in place to act in the event of incapacity. Of the emergency proceedings I have handled in court, 2/3 of them have been in the months of December and January. Business owners should especially have a plan in place should they become unexpectedly incapacitated. This is one that is not impacted by age or net worth; you should have a financial and health care agent in place in case you cannot make your own decisions temporarily or permanently.
  • Guardians for minor children. Spending millions of hours with your children after eating pounds of sugary treats should make you consider whether the guardians you have chosen (or the ones you SHOULD choose) are the right choices. Can your brother really handle your kids? Does the geographic location of those guardians make sense still? Are your kids old enough that you can remove that section?
  • Significant change in financial circumstances. Did you win the lottery this past year? Or did you spend your entire life savings on presents for the holidays? Many estate plans include specific dollar amount gifts to specific people; do you still have assets that cover those gifts? Are you in a financial position to add some specific gifts to family members?
  • Charitable gifts. This time of year reminds us to be generous to the charitable organizations around us as well. Did you include organizations in a prior plan with which you are no longer active? Did you want to add some new charitable gifts to your plan?
This is not an exhaustive list, but the Holidays and end of the year are a good time to review our estate plans and think through the family and personal decisions that go with them. Happy Holidays!