Red Rocket's Best Startups of 2012

Red Rocket meets with 150-200 startups each year, in the normal course of doing business here in Chicago, or via my FireStarter Fund involvement.  I thought it would be nice to honor the best of those startups, in Red Rocket's first annual "Best Startups of the Year".  This list is not intended to be an all-encompassing best startups list, as there are many additional great startups that I do not meet with each year.  And, this list is not intended to be only for businesses that launched in 2012, it is open to startups of any age, that had some personal interaction with me in the last 12 months.  The business simply needed to have a good idea, good team or good traction, that caught my attention.  Congrats to you all!!

THE BEST STARTUPS OF 2012 (in alphabetical order):

AutoFlipr (CEO Brian Killen)--B2B interdealer used car marketplace

Cartavi (CEO Glenn Shimkus)--B2B real estate closing documents platform

CouponTrade (CEO George Bousis)--B2C gift cards marketplace

Crowdspring (CEO Ross Kimbarovsky)--B2B graphic design crowdsource

Elicit (CEO Eric Heneghan)--B2B search-box marketing platform

EvzDrop (CEO David Rush)--B2C location-based communication platform

GiveForward (CEO Desiree Vargas)--B2C donations platform for healthcare needs

Hireology (CEO Adam Robinson)--B2B  HR candidate screening platform

JSTN (CEO Roger Stanton)--B2B video job postings & B2C video job search

Kapow Events (CEO Marc Halpin)--B2B group event planning marketplace

Koupon Media (CEO TJ Person)--B2B mobile couponing platform

Live One Group (CEO Tim Ganschow)--B2B social video watching platform

MakeBuzz (CEO Christopher Skinner)--B2B marketing optimization platform

MotiveQuest (CEO David Rabjohns)--B2B next generation market research via social data

Mystery Tackle Box (CEO Jeremy Gwynne)--B2C fishing tackle subscription service

Retrofit (CEO Jeff Hyman)--B2C data-driven weight-loss management

Rivs.com (CEO Dave Wieland)--B2B high-volume hiring automation

Shiftgig (CEO Eddie Lou)--B2B job hiring and business networking for service industry

SocialCrunch (CEO Alex Griffiths)--B2C online behaviorial targeting via Q&A

SpartzMedia (CEO Emerson Spartz)--B2C publisher of community websites

SpikeBall (CEO Chris Ruder)--CPG sporting goods product

SpotHero (CEO Mark Lawrence)--B2C discounted parking application

StyleSeek (CEO Tyler Spalding)--B2C men's fashion discovery engine

Tiesta Tea (CEO Patrick Tannous)--CPG flavored and functional teas

TrainSignal (CEO Scott Skinger)--B2B online education for technologists

TrunkClub (CEO Brian Spaly)--B2C men's fashion service

UpCity (CEO Dan Olson)--B2B SEO and digital marketing platform

viaForensics (CIO Andrew Hoog)--B2B mobile application security


Congratulations to you all!!  Keep up the good work. 

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Lesson #131: How to Design a Logo & Tagline

Your company's logo and tagline are often the first visual experience a person has with your brand and company.  And, you always want to make a good first impression with potential customers, employees, partners and investors, coming across as someone they want to do business with.  This post will address what research should you do in preparing for a logo and tagline design project, what creative elements should go into designing a logo and who can help you with the actual design itself.

In terms of research, it is always good to get a sense to how others in your industry are marketing themselves first, to see what you are up against.  So, visit a bunch of sites in your industry. You always want to come across as equal to, or better than, the other players in your space.  Your logo and branding can't feel like 2003 in design, if you are trying to come across as a 2013 next-generation product or service.  And, you want to think about colors and logo treatments that won't easily get confused with others in your space (e.g., if other companies are using blue, perhaps you use orange to stand out).  Unless, you need to bias colors that are the default color for your industry (e.g., green for eco-friendly companies), or you want to use colors to create a certain brand mood (e.g., red for speed or excitement).  And, don't forget about unintended missteps, like picking a red color (symbolic of losses) for a company that helps drive profits (in the black or in the green).

As for the logo design itself, I am typically a fan of a clean company name in a sharp font, a memorable graphic image to the left (which is optional) and a company tagline below the name (also optional, but much preferred for startups).  The font style of the company name should be representative of your industry (e.g., block university letters, if appealing to college sports fans), as certain fonts will help you to better communicate what your business does.  The graphic image should uniquely tell your company story (e.g., an airplane encircling a globe, for an international air travel business), and be easily identifiable on a stand alone basis (e.g., as your Twitter profile image, or mobile app icon).  And, the tagline for a startup should best describe what your business does, in as few words as possible, being careful not to be too vague to start.  For example, for Nike, "Just Do It" works well for a 40 year old brand that the world knows for high performance athletic wear.  But, for their startup years, "High Performance Running Shoes" would work better, helping to simply explain what the company does before any brand awareness has been built.

In terms of the designer doing the work, you have many options if you need an outside resource.  Here is my list of reputable design firms in Chicago.  Focus on the ones with branding and logo design expertise.  But, frankly, why hire one firm for a logo, that may charge up to $5,000 for their design, when you can get over 100 logo samples to choose from, for only a few hundred dollars, when working with crowdsourced designer sites like Crowdspring, 99 Designs or DesignCrowd.  I just used Chicago-based Crowdspring for a logo design project for one of my clients, and was very pleased with the results.

As a case study, take a look at the Red Rocket logo and tagline on this site.  I wanted to come across as a professional consulting and fund-raising firm that knows how to help startups get their businesses off the ground at warp speed.  I think our logo and tagline does a good job of telling that story, otherwise it wouldn't have caught your attention to keep reading the content of this post.

At the end of the day, you only have a few seconds to make a good first impression and clearly communicate "your story" and brand message.  Your logo, graphic and tagline can go a long way to telling that story and getting the attention of your target audience.  So, take the time, and get it right.

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Lesson #130: Driving Sales Requires Driving Key Metrics

Many startup CEOs think "if we build it (a sales team), they will come (customers/profits/success)".  Which is largely true, especially if you are hiring a great team and giving them the marketing support they will require to effectively do their jobs.  But, I think it is missing a key point.  Most sales teams are managed on their ability to drive revenues, not gross profits, which is a better metric to focus on, as detailed below.  And, many startup sales managers typically do not focus on the key metrics that build up to revenues (e.g., leads, conversion rates, average ticket, upsells), which is even more important for growing and optimizing sales.  This post will give you some helpful guidance in this area.

Firstly, why focus on gross profit, and not sales, as your key number to manage your sales team by?  There are two primary reasons: (i) anybody can give products away at discounted prices, helping salespeople hit their sales targets for commissions, but hurting the company's bottom line in the process; and (ii) helping to educate your sales team on your gross margins, the number their commissions will be driven by, will help them to bias selling higher margin products, further helping your bottom line profits.  So, where you can, use gross profit, and not revenue, as your key driver of sales management and commission planning.

Secondly, revenues are not comprised of one number calculated in isolation; they are calculated based on a series of key drivers that build up to revenues.  These key drivers include: (i) number of calls/unqualified leads initiated by the salesperson (base level productivity each month); (ii) number of qualified leads (prospecting rate on initials calls); (iii) number of proposals sent (engagement rate on qualified leads); (iv) number of transactions closed (conversion rate on proposals sent); and (v) average transaction size (upselling and cross selling rate).  In addition, if you are selling more than one product, you will want to build in tracking for the mix of such sales, to identify key upsell and cross sell opportunities.  These all build up to total revenues and gross profit, and each should be tracked by person and by department to identify key success stories and training opportunities within the organization. 

And, this works for both B2B and B2C companies.  As an example, I would use metrics similar to these when I was at iExplore selling adventure travel.  I would study our initial contact rate divided by website visits (looking for web design or product improvement opportunities); our conversion rate on qualified contacts (to see how well our travel agents were converting leads into sales); our passengers per booking (looking for ability to talk traveler into bringing friends); our trip price (looking for ability to sell our highest ticket trips); our trip margin (looking for ability to sell our higher margin tours); and our sales of related products or services, like airfare or travel insurance (looking for upsell efficiency).

So, when building your sales organizations, not only look for great talent, but make sure your team truly understands your business/margins, and manage the key metrics that really matter to driving maximum financial success.  And, be sure to incentivize your team based on their hitting the key metrics that matter most for your business.

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Lesson #129: "Productize" Your Business for Maximum Efficiency

In the startup world, "customized solutions" really makes investors nervous, as customized typically means: (i) lots of human involvement (which can get expensive); (ii) difficulty in profitably scaling the business (compared to non-customized technology offerings); and (iii) inefficiencies in your sales and fulfillment teams (reinventing the wheel over and over again).

So, where you can, you need to "productize" your business offering for maximum efficiency.  Instead of offering clients anything and everything they want (because you cannot efficiently be all things to all people), focus on designing core products or services that you can easily sell and fulfill over and over again, without having to reinvent the wheel for each client or sale.  Even if customization is one of your key selling advantages versus competitors, there are ways to offer customization in more efficient ways.

Let's look at an example.  When I was at iExplore, one of the ways we differentiated our tour offering was to allow travelers to customize their vacations to their exact specifications.  In the early days of this business, we would let our customers customize anything and everything they wanted, including their desired destinations, activities, trip length, dates of travel, hotels, etc.  This wreaked havoc on our travel agents, having to source travel services from suppliers all of the world, over and over again.  And, whatever higher prices we were able to get from a highly-customized solution, we were giving it entirely back in terms of much higher fulfillment costs and lower margins.

To fix this, we "productized" our tour offering to allow customers ways to customize their trip, but in ways that made better financial sense for the business.  We did this as follows: (i) we did not offer customization to 225 countries around the world, only the 50 countries that we deemed to be our best sellers; (ii) we did not offer clients any hotel of their choosing, we designed five star "Gold" versions of our trips (staying at hotels like the Ritz Carlton) and four-star "Silver" versions of our trips (staying at hotels like Marriott), picking the best hotels in each price point in such regions; (iii) we created preset itineraries with key activities that would be provided on each trip (e.g., safari game drive at Masai Mara Kenya), with pre-bundled upsell opportunites (e.g., hot air balloon ride); and (iv) we worked with a fewer number of preferred ground operators where the fulfillment process could be fine tuned and we could negotiate the best volume discounts.  We still let the travelers pick their desired dates of travel, which was the most important thing to them.

By doing this, we had taken 90% of the "heavy lifting" out of the customization process with preset procedures and processes our sales team could sell by, and our operations team could fulfill by.  And, at the same time, offered a product that was still largely customizable by consumers, differentiating us from our pre-set packaged tour competitors, but in ways that did not cripple our business.

So, where you can, offer a fixed product or service offering to maximize efficiency in your business, biasing technology-driven solutions over human-driven solutions for maximum scalability.  But, if customization is required, look for ways to "productize" your offering, to help simplify your ability to sell and fulfill these products or services.

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Lesson #128: Try to Kill Your Startup Before You Start

Earlier this year, I had the pleasure of sitting on an investor panel with Joe Dwyer, a partner at OCA Ventures, a good colleague of mine.  I thought he made a very interesting comment, that I told him I was going to steal (with his permission).  He was counseling the startups in the room to "try to kill your startup!". 

My initial reaction was: that is a very strange comment to make to a room full of aspiring entrepreneurs trying to successfully get their businesses off the ground.  But, as Joe went on to explain it, he said "if you have done everything you could have done to kill your startup, and were unsuccessful in doing so, then you are truly on to something that is defensible and worth building."  Which I thought presented very interesting pearls of wisdom.

So, what does trying to kill your startup actually mean?  You need to poke and probe across all areas of the business, looking for holes that could lead to potential shortfallings in the business or which can facilitate potential moves by competitors that will impede your own efforts. 

Any macro level issues?  Industry too small?  Space not of interest to VC's?

Any competitive issues?  Pricing out of line?  Product not as good as others?

Any management issues?  Any weaknesses in the current team?  Is the team economically motivated for the long haul ahead?

Any revenue related issues?  Is there a real business model here?  Can revenues easily scale?

Any sales and marketing issues?  Is your cost of acquisition too high compared to revenues?  Does your lifetime customer value provide compelling economics and repeat sales?  Is it a long sales cycle or a short one?

Any technology issues?  Is it easy replicated by others?  Is it patentable?

Any human resources related issues?  Is it tough to find talent in this space?  Can you afford the talent you will need? 

Any finance related issues?  Do you have enough money to not only build the product, but to test the initial marketing economics?  Is it a small capital requirement, or a major fund raising exercise?  Do you have compelling unit economics, including a high gross margin? 

Any investment related issues?  Is there a logical buyer for this business?  Can a 10x return be easily acheived?

Etc., Etc., Etc. 

At the end of the day, this reiterates a lot of the points we talked about in my Definitive Checklist for Startup Success.  So, pull out your pistols and daggers and start firing away at your startup, much like your competitors will be doing.  If you survive that dog fight, then the hard work of building your business can really begin!!  Thanks, Joe, for pointing us in this direction.

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Lesson #127: How to Screen Salesperson Candidates

Back in Lesson #35, we talked about How to Read Resumes and Screen Employee Candidates overall, so I am not going to repeat those points.  But, I do want to specifically drill down on how to screen salesperson candidates, as often times, the quality of your sales team will make or break your revenue stream.  So, keep reading if you are a salesperson-driven seller of B2B products or services.

Here are the key things you need to ask sales candidates (in addition to the generic questions in Lesson #35), to assess if they will be good sellers for you:

Industry Expertise.  A good salesperson can sell most anything, with training.  But, if they come from your specific industry, that would be preferred, as they are materially up the training curve, understanding your industry's vocabulary and needs.

Startup Expertise.  Living within an often less-structured startup environment may or may not work for certain candidates, who may be used to selling within a more formal big company structure.  Make sure they have the right startup DNA for the job.

Enterprise or SMB Sales.  Selling into Fortune 500 companies, is different than selling into small and medium sized businesses, with the former typically much harder and longer lead cycle than the latter.  So, where you can, find candidates that match your target customer markets.

Outside, Virtual or Inside Sales.  Some salespeople are fine working out of their homes, others need comradery with other employees in the office and others may or may not be willing to do the required travel for the job, depending on where they are located or their family situation.  So, make sure what you are offering them is within their interests and skillsets.

Job Hops.  I always get nervous when I see a lot of job changes within a short period of time (e.g., five different companies in five years), especially for salespeople, since they may have been forced out for low sales productivity.  Make sure there is a logical explanation for each move, some of which may or may not be within their control.

Complex or Easy Product.  Selling a next-generation technology is a lot harder than selling a pencil.  Determine if your product is a complex sell or an easy sell, and find candidates with the matching skillsets here.

Support Team or By Themself.  Did the candidate entirely support their own sales process (e.g., cold calls, proposal creation, contract creation, lead nurturing, invoicing), or did they have a team working with them.  Depending on your budget and situation, make sure they are OK rolling up their own sleeves.

Active Rolodex.  This is probably the most important point: do they have an active Rolodex of clients that would be most logical buyers of your product or service.  If you are selling to CMO's, make sure your sales guys have plenty of CMO relationships they can immediately bring to the table.

LinkedIn Connections.  To me, you are not a good salesperson if you are not actively shaking up leads and networking within business social networks like LinkedIn.  Check out their LinkedIn profile to see how many connections they have (hopefully 500+), and connect with them to see if the titles of the people they know are people that would most likely buy your products or service.

Direct or Reseller Sales.  Some salespeople sell client-direct, and other salespeople sell to middlemen or resellers (e.g., the difference between Pepsi or their ad agency).  It is typically best to find salespeople with deep direct sales experience and success, as that is much harder to drive big volumes of business and you know they have the key client relationships needed.

Lead Generator or Recipient.  Some salespeople are hunters, tracking down their own leads via cold calling.  And, others are the beneficiary of leads from the marketing department, the website or an administrative cold caller.  Find the candidates with experience and interest in "dialing for dollars" on their own, if that is all your budgets can afford.

Annual Sales History/Average Ticket.  Probe on their past sales experience in terms of sales per year to see if it aligns with your own needs for this position.  But, also drill down on the average ticket of their past products sold, as selling one contract for $1MM is not the same amount of work/productivity/success as selling 10 contracts at $100K each for the same million dollars. 

Exceeded Past Quotas.  The proof is in the pudding.  Ask them their past sales quotas and how often they missed, met or exceeded such levels.  So, if their quota was $1MM a year, they better have been selling in excess of $1MM a year.

Team Management Experience.  If your company is experiencing rapid growth, a good salesperson hire today, may quickly evolve into a sales manager of a team of salespeople down the road.  So, inquire if they have interest or past experience in this regard.  But, you have to be clear, their #1 job is driving personal sales for at least the first year.

Technology Experience.  Are they used to using a sophisticated tool like Salesforce.com as their CRM.  Or, were they simply managing leads in an Excel spreadsheet.  Make sure their technology desires and past skills, align with the tools you will be providing to them.

Compensation/Commission History.  Make sure your compensation package aligns with their needs.  If you are offering a $80-$120K base salary (the normal range for a good salesperson), compare that to what they were making at past jobs, to make sure it covers their current lifestyle.  Same, thing for total compensation including commissions.  If they are used to living on a $250K all-in package, they won't stick around if they are only making $150K with you.  And, the last thing you want is heavy turnover in your sales team.  So, critical you get this right.  And, where you can, offering equity in your startup, may be just the right incentive to pull a rock star sales guy out of their current job.

Have Them Sell You Something.  Nothing demonstrates good sales skills better than having them sell you something.  This could be something from their past jobs, or a hobby of theirs, or even your own product with no training just to see how they would approach it.  Particularly assess their listening skills, and ability to pull useful information out of you.

Speak To References.  It is critical you talk to their past sales managers, the people they directly reported into, who can speak to the candidate's abilities in driving sales and exceeding quotas better than anyone.

Hopefully, this list has provided you with the right questions to ask your sales candidates during the initial interview process, to ensure you have the best chances of assembling an all-star sales team for your company.

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Lesson #126: What Startups Need to Secure a Bank Loan

Back in Lesson #49, I talked about How to Get a Bank Loan.  And, as you remember, I was quite bearish on the prospects of early-stage startups securing financing thru traditional banks, given their stringent lending criteria.  But, for those of you that can meet those requirements, there are traditional and non-traditional banks that could be a good source of capital for you.  In this post, I will summarize what it will take to secure bank financing through both of these channels.

To help me with this post, I reached out to my colleague Mike Kohnen, the head of the Midwest Region for Silicon Valley Bank ("SVB").  SVB is a "non-traditional" bank, with deep expertise in serving startups, particularly in the technology space that many of us operate.  As you will read, SVB is very "startup friendly", and often can do loans for rapid growth, high margin companies, even if they are losing money and without requiring personal guarantees or other forms of collateral or restrictive convenants.  This was a breath of fresh air to learn.

Below are the key things you need to think about to secure loans from both the SVB's (non-traditional banks) and traditional banks of the world (biasing your local community banks over the big national banks where you may have a higher odds of success):

Industries.  SVB specifically focuses on technology and life sciences.  But, traditional banks are often generalists, for most any company's needs.  Traditional banks can often prefer the retail, restaurant and asset intensive companies, that the traditional VC's don't like to fund.  The reason being they have tangible assets to secure their loans.

Management Team.  Any bank is going to be looking for a strong management team.  Preferably one with deep experience in the company's industry and a proven track record of startup success.  SVB is particularly strong in assessing team's best-suited for startups, given their sole focus here.

Outside Investors.  Outside investors are not required.  That said, having funding, or the potential of funding, from big name venture capital firms certainly doesn't hurt.  Especially if those firms have a long history and proven track record of working with the bank.  At SVB, outside investors are typically required for longer-term loans, but not for everyday working capital needs or near term growth capital, provided there is a clear path to repayment down the road (e.g., high odds of venture financing down the road or a likely path to a cash flow positive operations).

Age of Company.  SVB doesn't care how old your company is, they are investing in your credible projections for high growth in the sectors they focus in (e.g., technology, life sciences).  But, all traditional banks will most certainly want to see a couple years of history and financial statements, before approving a loan, since they are going to be looking for sustainable cash flow to repay that loan.

Revenues.  As I mentioned, SVB is looking for material, recurring and defensible revenues to be credibly acheived in your projections, but does not require a big base of historical revenues.  Most community banks are going to be looking for $1-$3MM of recurring revenues first.

Growth Rates.  SVB is looking for hypergrowth (25%-50%+ per year) from high gross margin businesses (50%-90%), where the technology is already built and execution of the growth plan has begun.  Most traditional banks are afraid of too rapid a growth plan, given the additional risks that imposes on the predictability of revenues and cash flow streams, with which to repay loans.

Profitability.  At SVB, profitability doesn't matter for early stage businesses, as they understand investing in growth may require material startup losses.  Profitability becomes more of an issue for them for later stage startups, to ensure the unit economics of the business are solid, and the company is starting to produce a profit as it scales.  All traditional banks are going to require a history of profits to ensure their loans get repaid.

Debt Ratios.  At SVB, they are not focused on debt ratios in early stage startups, but do start to focus on them for later stage startups.  Most banks will want to keep your debt-to-capital ratios below 50%.

Coverage Ratios.  For later stage startups, most banks are going to want to see a plan where you are driving at least 1.25-1.50x of EBITDA in excess of your debt service costs (e.g., any principal and interest payments owed).

Personal Guarantees.  SVB does not initially lead with requiring a personal guarantee.  Personal guarantees will only be asked for, if your credit approval is "on the fence" and the personal guarantee will help to approve the loan.  Most traditional banks are going to require a personal guarantee from the founders, to back up the loan in case the business cannot meet its obligations.

Securable Collateral.  SVB does not require loans to be secured by assets, although adding collateralized assets can often be used to help make the credit decision easier.  They understand the enterprise value of its tech startups is often tied up in its intellectual property.  But, most traditional banks are going to look for whatever assets they can secure (e.g., accounts receivable, real estate, equipment).  Banks will traditionally lend up 80% for accounts receivable, 50% for inventory, 60-80% for property/plant/equipment and 50-80% for real estate.

Interest Rate.  Interest rates vary based on the types of the loan.  Lines of credit can be 5%-7% (prime plus 2%-4%) for interest only loans.  Traditional banks can be a bit more aggressive here, since they have all the personal guarantees and securitized assets to protect them.  Longer term loans (e.g., 3 year notes) can be a little higher than this, given the higher principal repayment risk.  As a comparison, non-regulated venture debt funds (e.g, Western Tech, Hercules, Oryx Capital) can be in the 10-15% range.

Timeline to Repayment.  Lines of credit are typically set up for 1-2 years in length (the riskier your business, the shorter the term).  And, term notes are typically in the 3-5 years length (remembering term loans will require outside venture capital at SVB).  But, once you raise capital, getting a term loan on top of the equity, can be a unique way to turn a $3MM equity financing into a $5MM debt and equity financing, without diluting yourself for that extra $2MM raised from the bank.

There are many nuances to the above (e.g., variances between term loans, lines of credit, asset-based lending, factoring, equipment leasing), so don't read the above as set in stone.  But, hopefully it helped you assess whether or not your business is even close to being credit-worthy in the eyes of both traditional and non-traditional banks.

If you have any questions from here, Mike Kohnen at SVB has made himself available to learn more.  Mike can be reached at 312-704-9517 or mkohnen@svb.com.  But, please don't contact Mike unless you reasonably believe you have met the above criteria.

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Lesson #125: How to Bootstrap Your Startup

Sourcing capital for your startup is never easy, especially when you are pre-product completion and before the proof-of-concept the traditional venture investors are looking for.  Oftentimes, the only way to get your business from a piece of paper concept to a venture-backable business is to bootstrap your efforts, via whatever means necessary. 

Below is a summary of the some of the most-used bootstrapping techniques:

Limit Product Scope.  Always start by building a minimum viable product to get something quickly and cheaply into the market.  Cut back on any unnecessary features and functionality, that add up on costs and slow down the launch.  Don't try building a "Rolls Royce" product out of the gate, when a "Toyota" will work just fine to start.

Personal Assets.  Tap into whatever cash resources you have access to, from your cash accounts, to credit cards to home equity loans to selling other investments.  The less cash you raise from outsiders, the more your personal stake will be worth, especially during the "infancy" stage of your business when valuations will be at their lowest point.

Co-Founders.  Co-founders can be a great source of cash investment or sweat equity from people who believe enough in your product to work without a cash salary.  Don't think you need to build your startup by yourself.  Find others who share your dream and complement your skillsets.

Friends & Family.  Sometimes it is easiest to raise capital from the people that know you best, and can vouch for your personal drive and skillset, much better than a stranger investor can.  But, be clear with them upfront that they could most-likely lose 100% of their investment in a risky venture and not to invest more than they feel comfortable "gambling" with.

Vendors.  Sometime startup vendors are willing trade all or a portion of their services for equity.  This is a great way to make a $100K tech build a $50K tech build, as an example.  Re-read Lesson #115 for when it is best to trade equity for services.  And, even if they require cash, maybe they can spread out payments over time to help you.

Angel Investors.  If you can uncover them, there are plenty of rich individuals looking for the next big thing.  The problem is finding them.  Re-read Lesson #5 for best techniques for finding angel investors.

Startup-Investor Marketplaces.  There are some great sites like AngelList and Gust, that have created networking sites with startups on one side and angel investors on the other.  Problem is getting your startup found within the clutter of other startups.  Re-read my case study on how StyleSeek successfully raised capital through AngelList.

Crowd Donations Sites.  Sites like KickStarter and IndieGoGo have even made it easy to raise capital via donations from a crowd, without giving away any equity in your business.  This works best for "edgy" consumer products businesses, where donating consumers can get insider access to the first products built.  Re-read my case study on how Pebble Watch successfully raised $10MM through KickStarter.

Crowdfunding Sites.  With the passing of the Jobs Act in 2012, which legalized startup investing for mom-and-pop investors, a whole slew of crowdfunding sites are in development, like RocketHub and EarlyShares.  Find the ones that best fit your industry.  Re-read Lesson #111 on crowdfunding startups.

Small Business Grants.  Sometimes free grants are available if your startup is helping to solve a bigger problem (e.g., healthcare, education).  Check out Grants.gov, to see if any grants are available in the market you are serving.

Small Business Loans.  Working with the banks as a startup is not usually advised, given how conservative the banks can be.  But, some banks are more startup friendly than others.  Silicon Valley Bank is one of those banks.  You may be able to get a $50,000 startup loan, basically set up like a new credit card account.

Venture Debt.  Similar to bank loans, there are loans from venture debt companies like Western Tech.  These firms typically work best for financing securable technology asset purchases, with financial terms very similar to credit card debt.

State Tax Credits & Programs.  In the unlikely event your startup is generating a profit, be sure to apply for any state tax credits that may be available for startups, to reduce your tax bills or offset salaries from new jobs created.  Re-read Lesson #113 for more information on state tax credits and other programs for startups.

Free/Discounted Resources.   Always keep your eye out for free or discounted resources for startups.  Don't pay for consulting, if you can get free mentorship from a peer.  Don't pay for rent, if you can hangout out at a free shared meeting place like Starbucks, Tech Nexus or 1871.  And, check out preferred vendor discounts for startups negotiated by organizations like Startup America.

The key for being a good startup CEO is learning how to stretch pennies into man-hole covers.  Hopefully, this post helped you learn how to best stretch your very limited cash resources and find cash resources from previously unknown methods.

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[INFOGRAPHIC] Key Strategic Buyers, Investors or Partners by Digital Vertical

A while back, I shared an infographic on key sources of digital investment capital from Luma Partners.  That infographic included a list of key venture capitalists in various parts of the country.  Luma Partners has recently built a new infographic highlighting key strategic buyers, segmented by digital industry vertical (e.g., technology, commerce, marketing, media).  This list would also apply for finding potential strategic investors or business development partners, depending on your specific needs.

Thanks again to the Luma Partners team, for producing such useful content.  If you cannot read the infographic above, you can find a larger version on the Luma Partners website.

This post should be read in combination with Lesson #6: Structuring Strategic Partnerships for Your Startup and Lesson #64: How to Find Strategic Partners for Your Business.

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Lesson #124: Vesting of Founder's Stock

Founders of a startup are frequently surprised when venture capital firms or other investors ask for vesting provisions to be placed on the founders’ stock.  The investors are seeking to provide sufficient incentive for each founder to work through the company’s critical early formation and development phase.  If a founder leaves the startup early in the process, it would be unfair to the other founders and the investors for the departing founder to receive a “free ride” on the continuing efforts of the other founders.  The vesting terms cause a forfeiture of the unvested shares, or a repurchase at a low cost, upon termination of employment, thereby eliminating the free ride.

To get more professional guidance on this topic, I asked Jeff Mattson, a startup lawyer at Freeborn & Peters, to help us learn the key issues here.

A typical vesting structure is a period of four years beginning either upon the formation of the company or the closing of the first round of outside financing, with a one-year cliff, meaning that 1/4th of the stock vests on the first anniversary.  Thereafter, the stock vests ratably with 1/48th of the stock vesting each month.  In some cases, the stock instead vests annually with 1/4th of the stock vesting on each anniversary.  In either case, the founder is 100% vested on the fourth anniversary.

The logic of this typical structure is that it takes a full year to get through the formative stage, and thereafter, the value of the company increases incrementally.  The typical vesting schedule tracks this common growth pattern, rewarding the founder proportionately for services during these stages.

But, startups come in many shapes and sizes, and founders can request and obtain variations from the four-year vesting schedule in appropriate circumstances.  Following are a few of the most common reasons to adjust the vesting schedule:

1.  Other Contributions - If a founder has contributed money, intellectual property, or other assets to the company, the stock issued in return for those contributions should be fully vested, because the value has been provided in full and is not contingent on the future services.  Any remaining stock issued for services would still be subject to vesting.

2.  Prior Service – If the VC investment is being made after the formation of the company, the founders frequently are able to obtain credit for the prior services.  For example, if the VC investment is made one year after formation, the stock could be 25% vested upon closing the investment, and the remaining stock would be subject to a three-year vesting schedule.

 
3.  Shorter Startup Period – If founders reasonably anticipate a shorter period to bring products or services to market, profitability, or sale of the company, then investors have a shorter risk period and the vesting schedule can be reduced commensurately.

4.  Track Record or Expertise – If a founder has a proven track record or expertise that is particularly needed for the company, that founder may be able to leverage this strength into a shorter vesting schedule.  But don’t overplay this hand – if the investor is convinced a founder is critical, the investor may decide that vesting is even more important, to protect against the damage to the company if this key founder leaves the company.

Vesting stock commonly raises two additional issues: acceleration of vesting and the tax treatment of vesting stock.

Founders should always ask for the vesting of their stock to accelerate upon (a) a sale of the company or (b) a termination of employment without cause.  This formulation for vesting is called “single-trigger” acceleration, because the acceleration is “triggered” upon the occurrence of either one of the two events.  Investors usually want “double-trigger” acceleration, in which acceleration only occurs if the founder’s employment is terminated without cause following a sale of the company.  Investors are concerned that single-trigger acceleration will make the company more difficult to sell because, if all stock vests upon sale, buyers will be unwilling to take the risk of founders leaving the company shortly following the sale.

Finally, vesting stock creates a tax trap that first-time founders do not expect.  The tax code treats the grant of stock to a company officer or employee as compensation for services rendered.  The founder is required to recognize income equal to the value of the stock.  When a company is initially formed, the stock usually has no value, so the taxable income is $0.  But, if vesting is placed on the stock, IRS regulations deem the stock to be granted on the date of vesting.  If the company’s value increases over time, as anticipated, then the stock gains greater and greater value upon each vesting date and the founder must recognize income on each vesting date.  If the startup goes well, this income is quite significant, resulting in substantial income tax at a time when the founder may not have cash available to pay the tax.

Generally, founders can mitigate the above-referenced tax costs by filing an election with the IRS, called an 83(b) election.  The 83(b) election treats the stock, for tax purposes, as if there is no vesting, thereby eliminating the taxable event upon vesting.  But, be careful with this issue - the 83(b) election must be filed within 30 days of grant; no extensions are permitted; the election applies only if the stock is issued in connection with the performance of services; and the potential tax trap could be huge if you fail to file in the 30-day period.  Founders facing this situation should consult with knowledgeable tax counsel to determine the availability and effects of an 83(b) election.

If you have any further questions from here, Jeff is happy to offer his further assistance.  You can contact him at 312-360-6312 or jmattson@freebornpeters.com.

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State of the Internet: 2012

In case you have not seen the recently-published "State of the Internet: 2012" report by Henry Blodget at Business Insider, it is a must read for getting up to speed on what the key trends are in the digital world.  It is jam packed with data on overall trends, digital media, social media, e-commerce, mobile and stock valuations.

To read the full "State of the Internet:2012" slide deck, click here to read it on the Business Insider website.

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Lesson #123: Crowdfunding Details Starting to Emerge

Last week, I had the pleasure of sitting on a crowdfunding panel with Sherwood ("Woodie") Neiss, a serial entrepreneur and one of the original authors of the crowdfunding bill, who was meeting with Chicago's startup entrepreneurs, investors and service providers to gather our input on what desires we have for specific language to be incorporated into the Jobs Act.  Woodie was then going to take Chicago's collective comments, along with the comments from other startup regions around the country, back to the White House, so the President can get a better sense of what the startup ecosystem is looking to acheive via this law, and lawmakers can incorporate such goals into the law.

As part of this discussion, Woodie also presented some more details about where the current drafts of the law are heading.  Understanding this is still a moving target at this point, it should help you better understand whether crowdfunding is a good financing choice for your startup.  Please re-read my original blog post on Crowdfunding Startups as a refresher on what we are talking about here. 

Below were some of the highlights I took away from the presentation, as it relates to startups:

• You must be a U.S. based startup--foreign issuers will not be allowed
• Funding must be pursued via a registered crowdfunding portal or broker-dealer
• You can be either a C-Corp or an LLC, corporate structure does not matter at this time
• You can raise up to $1,000,000 via a crowdfunding effort, although bigger raises come with  higher requirements
• But, don't ask for too much, as it is "all or nothing" in order to close your financing--you need to raise the full amount asked for, before funds will be released to you
• Financings over $500K require a full accounting audit; financings over $100K require a CPA review; financings under $100K require a CEO letter speaking to financials
• You will be held to strict monthly financial reporting requirements (via compliance tools)
• It is still being determined if you can run "parallel financings" at the same time (e.g., concurrent equity and debt), but you can only raise equity on one portal site at a time
• You will be limited to general solicitation of investors only (e.g., via your social networks)
• You can have an unlimited number of investors participate in your financing
• Investors are limited to $2K for up to $40K income; 5% of income for $40-$100K income; 10% of income for over $100K income (up to a total cap of $100K invested per year)
• Investors can live anywhere--foreign investors are allowed to invest in U.S. startups
• Shares issued could be either voting or non-voting stock, depending on your needs (still TBD)
• Funds raised could be either direct shareholder investments, or via a special purpose entity which aggregates all investors into one investor pool for simplicity (still TBD)
• There will be a one-year holding period for all investors in a crowdfunded startup
• Thereafter, it is anticipated that a "secondary shares" market will develop to sell your shares
• Full background checks will be performed on the CEOs of all companies raising funds
• It is anticipated there will be 100's of crowdfunding portals to choose from, both generalists and niche specific (so choose carefully based on reputation and industry)
• It is anticipated that crowdfunding will work best around "community driven" initiatives (e.g., local town wants a new restaurant, and those citizens finance and use such restaurant)

I am still a huge fan of crowdfunding, as it will fill the financing hole until your product is built and "proof of concept" is acheived before the traditional venture capital investors take interest.  And, it will open up more startup capital outside of the tech industry (e.g., retail, CPG), where VC's typically do not play.  But, buyer beware.  As you can read above, it does come with a lot of strings attached (e.g., 1000's of investors to keep happy, primarily from your social network of friends, monthly reporting requirements).  Not to mention, this is simply "dumb money", as crowdfunding investors are most likely not coming in with a Rolodex of relationships or past startup experience to help you build your business (which is preferred).  That said, I am feeling better fraud will be kept in check based on the auditing requirements, the required background checks of CEOs and startups having to rely on their own social networks of friends to solicit investors.

If you would like to read the full act, click here.  If you would like to read a high level summary on the act from the SEC, click here.  If you would like to read comments on the act submitted to date, or you would like to submit your own comments for lawmakers to consider, click here.  Lawmakers are particularly focused on six areas: (i) how startups communicate the offering and spread word; (ii) how to mitigate fraud within social media; (iii) how to avoid a "messy cap table" for future VC's; (iv) how underserved communities can access capital; (v) how to build a local ecosystem for success; and (vi) how best to educate investors on startups in an "eyes wide open" way.  So, feel free to chime in.

Historically, small businesses are responsible for 50% of our country's job creation, and funds available to those startups have only represented 1% of the available capital. Hopefully, crowdfunding will help to rebalance this, and we can finally get our economy and job creation back on solid footing.

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[NEWS] George Deeb Named to Crain's Chicago Tech 50

Today, Crains Chicago released its Crain's Tech 50 list of people that are making a difference in Chicago's startup tech community.  I am honored to be included in this list, along side such well-deserving and respected colleagues.  And, frankly, I could easily add another 50 well-deserving people who are making Chicago a great place to build your startup.  Congratulations to everyone who is helping to contribute to Chicago's thriving startup ecosystem, as summarized in my blog post from July 2012.

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Lesson #122: Setting Key Milestones for Your Startup

Don't launch your startup trying to build a "Rolls Royce" with all the bells and whistles out of the gate.  Why not??  Firstly, the key with startups is speed to market, so you don't want to wait for building out "Rolls Royce" functionality, when you could have launched a "Toyota" much faster without materially impacting the core user experience.  Secondly, a "Rolls Royce" costs a lot more than a "Toyota", and when you are on a limited budget, as most startups are, every penny matters.  And, thirdly, it is best to iterate your product in small bite-size chunks, to see how users engage with the product and what features and functionalities they most use and desire.  For example, you may think they want a "Rolls Royce", but they may really want a "Porsche" at the end of the day.  So, before you get too far into your development, constant testing and surveying of your users can save a lot of wasted re-building expense down the road.

To help you bucket your startup development, break your startup into three phases: (i) piece of paper business plan through minimum viable product (MVP); (ii) MVP through full production site; and (iii) full production site through proof of concept.  From there, hopefully, you will be in a position to raise venture capital to scale up your business for the following growth phase of your business.  Below are a few pointers for setting acheivable milestones, for each of these three phases:

PIECE OF PAPER BUSINESS PLAN THROUGH MVP (roughly months 0 to 6)

Product: A bare-bones site with basic functionality that you won't be embarrassed by.  Build the site in a lean startup, agile process in bite size iterations every couple weeks until MVP complete.
Team:  You and your co-founder, preferably one of you a technical person building out the site.  Outsource for additional developers or designers needed.
Business:  Start laying the ground work to identify and budget for key partnerships you will pursue, and key sales or marketing channels you will test.
Users:  None yet, other then the development team testing the iterations of the product.

MVP THROUGH FULL PRODUCTION (roughly months 6-12)

Product:  Use this time to test with users to see what they like and don't like about the product, and then build out additional features and functionality of your beta site.
Team:  Start to recruit the rest of your senior team or any additional technologists required.  You don't necessarily need to hire them yet, but have candidates identified in the wings.
Business:  Start to reach out to business partners and start testing key sales and marketing channels identified in phase one.  No material revenues yet.
Users:  A minimum base of customers that is large enough to test with, and start to establish trends for monthly growth.  No material traffic yet.

FULL PRODUCTION THROUGH PROOF OF CONCEPT (roughly months 12-18)

Product:  You will no longer be in beta testing, with a full production website.  Continue to add in additional features and functionality over time.
Team:  You should have your full management team hired and in place, even if working for equity without cash salary.  This will be required to get the full attention of the venture capitalists.
Business:  You will have signed a few key partnerships (with a good pipeline in discussions) and proven an affordable cost of customer acquisition.  So, new monies invested in marketing will be used to accelerate proven tactics.  You should be showing preliminary revenues at this point, materially growing month over month.  The closer you can get to $1MM in revenues, the easier your fund raising efforts will be.  Start identifying and laying the ground work with venture investors, relationship building, but not yet asking for any money.
Users:  A material base of traffic, growing month over month, that helps venture investors acknowledge there is a real and growing appetite for your product in a sizeable market.

By this point, you should be ready for prime time and be in a good position to begin asking venture investors for your growth capital from here.  So, said another way, you will have to creatively figure out how to fund the first 12-18 months of your business on a shoe string or with angel investors until then.  So, plan far enough ahead of time what your capital requirements will be to get you from a piece of paper business plan, all the way through proof of concept, which will be required by the venture investors.  And, as always, include a big cushion, as things never go perfectly to plan.

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Lesson #121: Designing an Omni-Channel Business

Today’s consumers are more tech-savvy, seek more value and seek it through more channels than ever before.  Therefore, you need a consumer brand/user experience across all platforms, with content customized to the needs of each specific customer.  A shift in mindset from “comparable store sales” to “comparable customer sales”.  Below are a few high-level trends and considerations for properly designing an omni-channel business to meet these customer-centric needs.

• Omni-channel puts the customer at the center of all decisions and breaks down silos between the retail/web/mobile/social platforms.  See the following graphic from CRMsearch:

• While shopping retail stores, consumers are heavily using their smart phone for product review, pricing comparisons, sourcing coupons, etc.  You need to tap into that trend with mobile apps.
• Tablet visitors spend 50% more per transaction than smart phone visitors and 20% more than PC visitors. Need to make sure you have tablet platform apps built out and optimized.
• 60-70% of offline sales now impacted by digital efforts in one way or another, with digital investments in the 1-3% of revenues range, on average.  One channel drives the other, and vice versa.
• Marketing silos must be broken down, with one centralized effort for sourcing new customers, driving incremental sales from old customers, reducing attrition, maximizing effectiveness, managing inventory, leveraging data and building loyalty on one tech platform.  You can’t have web competing with retail, but collaborating for a combined/unified experience/success.
• Furthermore, marketing and technology are converging into one department, formerly siloed between CMO’s and CTO’s.  CMO's are more dependent on data than ever, and only technology can help them to prioritize and make sense of the "fire hose" of data coming in.
• Multi-channel customers spend 15-30% more than single-channel customers, and omni-channel customers spend 15-30% more than multi-channel customers.  You have to identify, incentivize and grow this base of high-affinity customers to truly maximize sales.
• Study user behaviors while they are not shopping, to look for targeted marketing opportunities (e.g., posted on Facebook they have an upcoming vacation, so you know when to follow up with a targeted luggage offer).
• Organizations must shift to more entrepreneurial startup mentalities—“always be deploying”
  requirements will create reorganizational pressures in the short term.  Digital needs a green light to “do amazing, next-generational things”.  IT oversight will shift towards a more “venture capital” mindset, vs. the current capital budgeting approach.
• Organizations should be designed with incentives/rewards, people/culture, business processes, technology and internal structure to fully embrace the evolution to omni-channel needs.  Capabilities need to be assessed with a “fresh set of non-biased eyes”.  There is no “one right answer” here, need to figure out what works best for each organization.
• Customer experiences need to be seamless from platform to platform, with similar branding, functionality, and content, optimized toward the strengths of each channel.  Here is an example template from Tyler Tate on  how to think about omni-channel design across platforms and customer tasks throughout the entire customer experience:

Add caption

Omni-channel marketing and loyalty are not simply buzzwords, they are based on hard facts and current trends in the market. Think overhaul, not upgrade, while ditching the one-size fits all mindset with consumers and channel silos internally.

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Lesson #120: Plan Ahead for Proof-of-Concept Marketing

It is a sad, but familiar, story in startup land.  An entrepreneur raises a limited amount of funds, plows it entirely into building out their product, and has no gas left in the tank for driving users to the site once the product is complete.  Then they go out hat-in-hand to the venture community looking for additional growth capital, without achieving the proof-of-concept required by the venture investors (in the form of initial user adoption).  Hence, leaving them out-of-luck with the VC's and scratching their head on how to raise sales and marketing monies to achieve their proof-of-concept.  They then typically turn to their friends and family, the same ones they most likely tapped for their initial seed financing to build-out their products, who have nothing left to invest.  This is the typical cycle I see over and over again with the startups that reach out to me for financing assistance.

Fortunately, for new ventures, this is an easily solvable problem to address, assuming you fund your businesses with enough proof-of-concept foresight right from the start.  When you are deciding how much money to raise day one, you can't only think about the cost of building out the product, you also have to leave enough cash cushion in the bank, to allow you to hit the sales and marketing accelerator once the product is built.  And, frankly, this latter amount is equally important as the product itself, as without it, you will not achieve the proof-of-concept points that will open up the additional venture capital to scale up your business from there.

Every business has its own unique sales and marketing objectives.  B2C businesses are usually marketing driven.  B2B businesses are usually sales driven, with enterprise-facing businesses having different challenges than SMB-facing businesses (e.g., tough to identify key relationships, longer sales cycle to drive revenues).  So, you need to think ahead of time for: (i) which tactics are best for your business (e.g., search marketing, social media, media relations, trade shows, salespeople); (ii) what is the "tipping point" that will get the longer-term venture investors over the proof-of-concept hurdle (by establishing relationships with them upfront, well ahead of asking them for capital); and (iii) budgeting how much sales and marketing monies will be required to allow you to reasonably achieve those objectives.

For example, let's say you are an e-commerce website.  And, the venture investor says, we would like to see 1,000 customers buy your product first, before investing.  With a 3% average conversion rate for e-commerce sites (which you learned from market research), you need to be able to afford driving 33,333 consumers to your website after the product is built.  And, if you are planning on buying paid search traffic from Google to do that, you will need to research the average price per click for your keywords and industry.  So, if that answer is $1 cost per click, you need to have $33,333 sitting in reserve to hit the gas on the marketing. 

And, worth mentioning, nothing goes perfectly as planned with startups, so I would set aside at least double what you think you will need.  As an example, if the average conversion rate for e-commerce sites is 3% overall.  It may only be 1% for a brand new company with no brand name recognition in the market, which suggests you would need to set aside $100,000, in the example above, to hit your proof of concept point.

Don't make the same mistakes of the thousands of entrepreneurs before you.  Start thinking through your proof-of-concept marketing needs from day one, to make sure you are raising enough funds right from the start.

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Lesson #119: How to Screen Venture Capitalists

Last year, I shared my definitive checklist for startup success, which included the things you needed to accomplish before approaching venture investors, to increase your odds they will be interested in funding your business. In this lesson, I am going to provide the inverse: a definitive list of things a venture investor should offer you, before taking money from them.

ABOUT THE FIRM

___ What is the firm's track record of success? Have them list their best performers.
___ Does the firm have a "brand name"? Some startups are perceived as being better investment/startup opportunities, if a big name firm is involved. This may help you attract other investors and business partners in the future. But, there are plenty of great lesser known investors.
___ How big is their current fund overall? And, more specifically, how much is still available for future investments. You want a firm with deep pockets, for this round, and the next.
___ Is this their first fund, or their fifth fund? The more funds they have raised over the years, the more successful their investments have been, attracting new capital over time.
___ What business contacts can the firm help make introductions for you? Their Rolodex is often more important than their capital, to help you more quickly open doors to business partners.

ABOUT THE TEAM

___ What is the specific Partner's track record of success? It is less about the firm, and more about the person you will be working with day-to-day.
___ Does the Partner have specific business experience, or only financial experience? It is always better to have the input of another successful entrepreneur who has actually been in the trenches.
___ Ask to speak to references from CEO's of their portfolio companies. Nobody will give you a better sense to the value provided and personality of the Partner, after the deal closes, than these CEOs.
___ Who from their firm will be sitting on your board of directors? Often times the senior Partner who does the deal, is not the more-junior person who will be filling their board seat.
___ What experience does the Partner have in your industry, as not all startups are created equal? Look for domain expertise in your industry and desired go-to-market strategies.
___ What is their personality and style? You will be spending the next five years with this team, make sure you can get along with them (in good times and in bad).

ABOUT THE DEAL

___ Are the investment terms, valuation and deal structure fair and in line with market levels? You can benchmark multiple VC offers against eachother, and research investment terms trends for a business of your size. Only work with firms that you feel are treating you fairly. A good startup lawyer can help here.


I have said this before: not all cash is the same shade of green. So, choose your investors wisely, to increase your odds of long term growth and business success.

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Chicago's Best Lawyers for Startups

Getting a good startup lawyer right from the beginning, can often be the difference between "off to the races" and "oops, why didn't we think of that before".  Picking a good lawyer often revolves around their expertise with startups, expertise in your industry, expertise for your specific project, bench strength of their firm, affordability, references and personality fit with your organization.  So, speak with several, to assess who is best for your business and liking, before making your decision.

There are several worthy lawyers in Chicago, with deep expertise in serving the startup community.  Below is a list of some of my favorites (in alphabetical order), having worked with them over the years.  You will be well-served by any of their counsel.

Frank Ballantine at Dykema
Online Bio: https://www.dykema.com/professionals-frank_ballantine.html 
Contact: 312-627-2509 or fballantine @dykema.com
Firm Size: 450 lawyers nationally ($$$ , but startup discounts) broad scope and depth of skills for all business needs
Clients: Confidential, but over 50 times outside general counsel, countless equity and debt transactions, 100+ M&A deals
Expertise: Strategic and legal counsel, entity formation and governance, IP protection and licensing, equity and debt financing, incentive compensation, M&A and joint ventures
Industries: AI, Fin Tech, Saas, mobile, software, digital security, tech services and development, healthcare and medical innovation, specialty materials, advanced manufacturing
Involvement: Advisory board of two venture funds; have invested personally  in 24 startups, venture funds and PE funds; served/serving ex officio on 26 client Boards of Directors, founding sponsor Hyde Park Angels, finals judge Booth Business School New Venture Challenge and Harvard Business School Regional  Business Plan Competition,  speak regularly on emerging growth corporate finance at Chicago business schools

Craig Bradley at Much Shelist
Online Bio:  http://www.muchshelist.com/attorney/craig-c-bradley
Contact:  312-521-2780 or cbradley@muchshelist.com
Firm Size: 85 attorneys ($$$).  Wide range of talent for all needs.
Clients:  Hireology, UrbanBound, UICO, Mediafly, Vertex, FourKites, Goby, Regenerative Medical Solutions, RedWave Energy.  100+ deals since 1993.
Expertise:  formation, fund raising, distribution, partnering, licensing, IP, M&A, compensation.  Highly rated by Chambers.
Industries:  technology, software, internet, communications, life sciences, health care, energy, materialsInvolvement: director at ITA, faculty at Kellogg, founder Wildcat Angels, steering committee for TEDxMidwest, 1871 mentor and speaker 

Matthew Brown at Katten Muchin Rosenman (or his partner Jeffrey Patt)
Online Bio:  http://www.kattenlaw.com/matthew-brown/
Contact:  312-902-5207 or matthew.brown @kattenlaw.com
Firm Size: 650 attorneys on three continents ($$$$, but flexible for startups).  Wide range of talent for all needs.
Clients:  BCV Evolve, eSpark Learning, LiveOne, Eved, Bloom Nation, Vaporstream, iKonverse
Expertise:  formation, fund raising, transactions, compensation, M&A, governance, strategy, IP.  Two recommendations from other lawyers on this list.
Industries:  technology, software, healthcare, financial services, entertainment
Involvement: director at Chicagoland Entrepreneurial Center, sponsor Booth Seed Con, sponsor New Venture Challenge, sponsor Clean Energy Challenge

Chris Cain at Foley & Lardner
Online Bio:  http://www.foley.com/christopher-c-cain/
Contact: 312-832-4553 or ccain@ foley.com
Firm Size: 900 attorneys in 21 offices in three continents ($$$$, but flexible for startups including deferred or discounted fees).  Wide range of talent for all needs.
Clients:  StyleSeek, VLinks Media, Bid Med, Procured Health, Shiftgig, Tap.Me, Tech.li
Expertise:  formation, fund raising, M&A, outsourcing, IP, litigation, strategy.  Former general counsel at Sonic Foundry and CPA from Arthur Andersen.
Industries: software, hardware, technology, social media, private equity.
Involvement: co-founder and host of Catapult Chicago

Leslee Cohen at Hershman Cohen
Online Bio:  http://hershco.com/hershman-lesleecohen.html
Contact:  312-445-9628 or lcohen @hershco.com
Firm Size: 2 attorneys ($$).  Partners with other small firms on an as-needed basis.
Clients:  CompassMD, Cognitive Advisors, Mobile Doorman, Trusted Mobile, Realync, Resident Gifts, StockTrendSpotter, BeyondTags.
Expertise:  formation, fund raising, distribution, partnering, licensing, M&A, compensation.  Super Lawyers Top 50 Women Lawyers and Top 100 Lawyers in Illinois 2012-present.
Industries: real estate, technology, retail, health care, education
Involvement: She has been named a Top 10 Lawyers in the State of Illinois by Super Lawyers. Co-founder of SBACConnects, mentor at WiSTEM, Elmspring, Bunker, Start-up Instititute, 1871 speaker, co-founder Coalition of Women’s Initiatives in Law.  Outstanding Service to Entrepreneurs Award from the Herald Daily Business Ledger.

Jon Fieldman (Independent)
Online Bio:  http://fieldmanlawgroup.com
Contact: 312-961-3844 or fieldman @fieldmanlawgroup.com
Firm Size: sole practice ($$).  Partners with other lawyers on an as-needed basis.
Clients:  Policy of non-disclosure.  But, many venture-backed startups.
Expertise:  Formation, fund raising, employment, litigation, IP, contracts, strategy.  A former partner with Sidley & Austin and a former CIO/COO (with deep business experience).
Industries: technology, finance, manufacturing, distribution, transportation, retail, food & beverage
Involvement: past-chairman of Lumity, member Friends of Blaine, producer of Transformational Leadership events

Scott Glickson at McGuire Woods
Online Bio:  http://www.mcguirewoods.com/lawyers/index/scott_l_glickson.asp
Contact: 312-321-7652 or sglickson @mcguirewoods.com
Firm Size: 950 attorneys in 19 cities in U.S. & Europe ($$$$, but flexible for startups).  120 in Chicago and 30 in tech practice.  Wide range of talent for all needs. 
Clients:  Sagence, Give Forward, ContextMedia, Code Academy, Akoo, Northstar, Future Simple, Fango (sold to GrubHub), FeeFighters (sold to Groupon).  Worked for me at iExplore.
Expertise: formation, fund raising, licensing, outsourcing, IP, team building, partnerships, disputes.  Two recommendations from other lawyers on this list.
Industries: information technology, clean tech, healthcare, private equity
Involvement: director emeritus ITA (20 years), director i.c. Stars

Michael Gray at Neal, Gerber & Eisenberg
Online Bio:  http://www.ngelaw.com/mgray/
Contact: 312-269-8086 or mgray @ngelaw.com
Firm Size: 175 attorneys ($$$$, but flexible for startups).  Wide range of talent for all needs.
Clients:  Built in Chicago, FireStarter Fund and others that are confidential.
Expertise:  formation, fund raising, M&A, IP, agreements, employment, compensation, taxation, estate planning, strategy.  Former VC, understands both sides.  Highly rated by Chambers.  Six recommendations from other lawyers on this list.
Industries: information technology
Involvement: member IVCA, member ITA, speaker 1871, speaker Booth School

Darren Green (Independent)
Online Bio:  http://www.fizzlaw.com/lawyers/darren-green
Contact: 847-205-0977 or dgreen @dgattorney.com
Firm Size: Sole practice ($$). 
Clients:  Total Attorneys, Local Offer Network, Inventables, Ad Gooroo, mFoundry, Body Shop Bids, Belly, Lightswitch, Code Academy, BankVue, Luxemi, Moving Station, Psylotech, Revenew
Expertise:  formation, fund raising, IP, M&A, JVs, agreements, compensation, employment, T&Cs, strategy.  One recommendation from another lawyer on this list.
Industries:  information technology 
Involvement: professor Northwestern Law School (teaching venture capital), partner Old Willow Partners (buy-out fund), writer Chicago Tribune

Greg Grove at Much Shelist
Online Bio:  http://www.muchshelist.com/attorney/gregory-d-grove
Contact: ggrove @muchshelist.com
Firm Size: 85 attorneys ($$$).  Wide range of talent for all needs.
Clients:  Voxsup, Engage-a-Pro, Noblivity, Conceivex, Pegasus Biosolutions, Blossom Coffee, Guardian Angel, Lemnos Labs
Expertise:  formation, fund raising, M&A, IP.  Silicon Valley based lawyer for 11 years. Former electrical engineer (MIT).
Industries: software, internet, communications, technology, electrical devices, healthcare tech
Involvement: sponsor and host of Founder Institute Chicago, speaker and free hours at 1871 

Jim Jerue at Horwood Marcus & Berk
Online Bio:  http://www.hmblaw.com/professionals-directory/james-l-jerue.aspx
Contact: 312-606-3202 or jjerue @hmblaw.com
Firm Size:  52 attorneys in Chicago ($$$).  Wide range of talent for most needs.
Clients:  eSpark Learning, KLUTCHclub, Smarteys, Vibes Media, HireBrite
Expertise:  formation, fund raising, M&A, partnerships, employment, contracts, taxation, estate planning. Two recommendations from other lawyers on this list.
Industries:  technology, healthcare
Involvement: mentor Excelerate Labs and Chicago Booth Accelerator, sponsor and investor Hyde Park Angels, co-chair private equity subcommittee at Chicago Bar Association

Ben Kern at Winston & Strawn LLP
Online Bio:  http://www.winston.com/en/who-we-are/attorneys/kern-benjamin-d.html

Firm Size: 900 attorneys in the US, Europe and Asia ($$$$, but flexible for startups)
Contact: 312-558-3747 or bkern@winston.com
Clients: Fruition Partners (sold to CSC); Base (FutureSimple); SIM Partners; Amstatz; Momentum Dynamics; Synapse Games; Liquidus; also represents venture capital investors and large strategic buyers and investors.
Expertise: venture capital, M&A, joint ventures, strategy investing and acquisition, technology transactions
Industries: software, SaaS, technology services, devices and medical devices, wireless, life sciences, gaming, new technologies

Bart Loethen at Tucker Ellis LLP
Online Bio:  https://www.tuckerellis.com/people/bartly-loethen
Contact: bartly.loethen@ tuckerellis.com
Firm Size: Founded in 2003, Tucker Ellis LLP has strategically grown to more than 215 lawyers serving clients nationwide from seven locations ($$$).
Clients: policy of non-disclosure, but has a great list (e.g., Bart has done my legal work for Red Rocket and MediaRecall).
Expertise: formation, fund raising, taxation, litigation, M&A, IP, licensing.  Two recommendations from other lawyers on this list.
Industries: technology, high growth, healthcare, software
Involvement: board SmartBet

Galen Mason  at Michael Best
Online Bio: https://www.michaelbest.com/People/Galen-Mason
Contact: 312-596-5814 gmason @michaelbest.com
Firm Size: 300 attorneys in 13 offices ($$$, but flexible for startups including deferred and discounted fees).  Wide range of talent for all needs.  Very founder focused.
Clients:  Lumere, Tillable, Reconstruct, Serra Ventures, Network Ventures, Woodlawn Partners
Expertise:  formation, venture fund raising, M&A, outsourcing, regulatory, IP, litigation, strategy. Runs a Series A venture capital index fund focused on the Midwest, Service Provider Capital.
Industries: software, hardware, consumer goods, manufacturing, technology, social media, private equity.
Involvement: co-founder of Catapult Chicago, co-founder of Service Provider Capital

Ken Obel at goodcounsel
Online Bio:  http://www.mygoodcounsel.com/bio/
Contact: email contact@mygoodcounsel.com or using contact form on site is best.
Firm Size: 3 attorneys and paralegal ($$).  Partners with other lawyers for other full-service needs (e.g., patent prosecution).  Often fixed-fee projects instead of hourly rate based.  Also offers subscription-based Counsel-as-a-Service packages.
Clients:  ItemMaster, Neighborhoods.com, Pictarine, SingleHop, SkinIO, Upfront Health Services
Expertise: Entity formation and structuring, co-founder matters, debt/equity financing rounds, incentive compensation, commercial agreements. Also offers internal legal process automation to streamline client operations and reduce contract cycle times. Was the co-founder of a local startup (Fox & Obel Food Market) and served for 10 years thereafter as general counsel for early-stage companies (HighBeam Research, Viewpoints Network), so has firsthand legal and business experience in startups. An avid cyclist, Ken is willing to hold an introductory meeting on a ride with you. Two recommendations from other lawyers on this list.
Industries: SaaS platforms, information technology, EdTech, consumer, healthcare
Involvement: Class mentoring at Northwestern/Kellogg. LawMeets judge at Northwestern University Law School

Michael Rosenthal at Polsinelli Shughart
Online Bio:  http://www.polsinelli.com/professionals/mrosenthal
Firm Size: 600 attorneys nationwide ($$$$, but flexible for startups).  40 lawyers in tech practice, many with computer science and engineering degrees.
Contact: 312-463-6318 or mrosenthal@ polsinelli.com
Clients: C-Sam, ViMedicus, Advanced Molecular plus many venture firms (e.g., Adams Street, River Cities, Amiti, Psilos).
Expertise: formation, fund raising, strategy, partnerships, IP, compensation, M&A, JV's, litigation, data privacy, a bridge to capital/strategic partners globally.  Highly rated by Chambers.  Three recommendations from other lawyers on this list.
Industries: information technology, healthcare, medical
Involvement: member IVCA and ACG, sponsor of Chicago chapter of Startup Leadership Program, sponsor Illinois Business and Investor Forum and Chicago New Media Summit

Spencer Wood at Polsinelli Shughart (or his partner Teddy Scott)
Online Bio:  http://www.polsinelli.com/swood/
Contact: 312-873-3677 or swood@ polsinelli.com
Firm Size: 600 attorneys nationwide ($$$$, but flexible for startups).  40 lawyers in tech practice, many with computer science and engineering degrees.
Clients:  policy of non-disclosure.
Expertise:  formation, fund raising, M&A, IP, tech development
Industries: technology, software, internet, medical, financial, digital media, life sciences, clean tech, energy.
Involvement: lecturer at Tribeca Flashpoint Academy, mentor at PROPEL and Chicago Innovation Mentors, hosts Venture Capital Group meetings of Business Network Chicago (BNC).

Anthony J. Zeoli at Freeborn & Peters LLP
Online Bio: http://www.freeborn.com/attorney/anthony-j-zeoli

Contact:  312-360-6798 (Phone); azeoli@ freeborn.com (email)
Firm Size: 125 attorneys ($$$).  Full service law firm, with expertise for all needs.
Clients:  Range from entrepreneurs and small, privately held, businesses to multi-million dollar entities. 
Expertise:  Specializes in the areas of real estate, commercial lending, private equity, securities/private placements, M&A, crowdfunding, peer-to-peer (P2P) lending, Regulation A+ offerings, and general corporate law. Industry-recognized crowdfunding, Regulation A+ and JOBS Act expert and author of the Illinois Intrastate Crowdfunding Exemption (House Bill 3420).
Industries:  Real estate, crowdfunding/P2P lending, technology, commercial finance and general start-up.

Involvement: Board member and Secretary of the CfPA (Crowdfunding Professional Association) and an active member of CFIRA (Crowdfund Intermediary Regulatory Advocates); Board member of the New York Distance Learning Association (NYDLA); Mentor and a student advisor at the University of Illinois at Chicago.

Bruce Zivian at Barnes & Thornberg
Online Bio: https://www.btlaw.com/en/people/bruce-zivian
Contact: 312-214-5601 or bzivian @btlaw.com
Firm Size: 600 attorneys in 18 offices in U.S. ($$$$, but flexible for startups).  Wide range of talent for all needs.
Clients:  policy of non-disclosure.
Expertise:  Formation, fund raising, JV's, distribution, compensation, licensing, IP.  Three recommendations from other lawyers on this list.
Industries: biotech, medical products and devices, web based services, software
Involvement: director Urban Students Empowered


If you think I am missing anybody, or think you should be included in this discussion, feel free to add your thoughts in the comments field below.

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