Last Thursday, at the offices of Orrick, Herrington & Sutcliffe LLC, I was one of several InSITE Fellows who had the opportunity to learn about starting a company –with a focus on the legal and fundraising process –from some true industry experts.
David Concannon is a Partner at Orrick, where he leads the East Coast Technology Companies Group. He helps technology companies secure financing, as well as strategize exit and growth opportunities. He has significant experience in start-up formation, venture capital, public offerings, joint ventures, restructurings, acquisitions, and other arrangements.
Wendell Lansford, founder and CEO of leading social media marketing company Offerpop, is a serial entrepreneur, with several successful exits under his belt. His successes include Sitebridge, acquired by eGain; and Systinet, acquired by Mercury Interactive/HP. Offerpop, which presented at this month’s New York Tech Meetup, allows its customers to create professional social media campaigns quickly, and track all results in real-time using their fun and engaging apps, tools, and know-how; 63% of those trying Offerpop convert to paying customers. The company has grown rapidly to about 250 employees.
Over a nice breakfast of coffee, bagels, and fruit, David and Wendell engaged us in conversation about their successes and were frank with advice about working in, or looking to move into, the startup technology space. The passion of our breakfast companions, for their work in the volatile and high-risk startup environment, was evident in the way they described opportunities, and in their willingness to share lessons from their experiences. Their suggestions really allowed me to consider each aspect of a startup, and some of the important factors to keep in mind.
On New Technology Ideas
What is a good way for entrepreneurs to seek out and find new ideas? Looking for new companies is about looking for emergent business platforms. One example is UberX, which simplifies the transport experience by allowing seamless and automatic payment. This type of technology holds significant promise because it makes doing things so much easier –you no longer have to hunt for your credit card or enter information.
Additionally, there has been significant increase in user-generated content and self-expression. Some of this is reminiscent of days of Internet 1.0 and early web hosting services such as GeoCities. What has changed is that barriers to self-expression have fallen, so the frequency of these activities and the number of people participating has gone up exponentially. For example, Facebook recently introduced Chat Room, re-inventing a popular concept from the 1990s.
On Pivoting and Seeking Funding
Companies will often pivot before hitting success and securing funding, and a new business idea or concept often needs significant tweaking from its first iteration. Wendell, when founding Offerpop, originally started with an idea for a collaborative platform –at which point the company was self-funded –but saw that collaboration was a challenging space to make revenue-positive and so pivoted to become a marketing platform. At this point, he was able to reach out to his strong network of prior investors, including some Angel investment and secure funding to grow Offerpop.
Seed funding didn’t used to work for tech companies because of high fixed costs –servers, software, etc. However, now the barriers to entry have fallen dramatically. Though many startups may not have the strong VC network of someone like Wendell, all can benefit from keeping valuations low, and ensuring that the business model is strong, to maximize success when pitching to VCs.
Legal Services, Costs, and Moving In-House
David pointed out that companies just starting out are often on tight budgets, and may question how to best allocate legal dollars. However, the legal ramifications of poor legal service can be high. For those looking for a less expensive option, services such as Hire an Esquire (which David partners with for some WeWork companies) and Clerky (for basic formation papers) can be good alternatives.
More established startups might wonder when to go in-house with legal service. In-house lawyers are rarely one of the first 20 hires. However, for companies reaching approximately 200 employees, it can be helpful to have someone in-house who can do some of the legal work, and split work between a legal council and experts to better manage costs.
Growing Your Startup and How to Hire
Employee quality can make or break a company. It is important for startups to predict accurately who they can find and when. At Offerpop, standardization and quick hiring decisions (in a day rather than in a week) have helped manage this process.
Exits and Successes:
Wendell and David spoke about exists and successes. Though Wendell has had several very successful ventures, David was careful to point out that success as a startup is still very difficult and that it is clear that Wendell is “one of the exceptional ones.”
There is increasing connectedness between markets in different cities. Although there has been significant growth in the New York Tech scene, there still has only been one $1B+ exit in New York City –Tumblr. In that sense, New York falls behind Boston and Silicon Valley. However, the number of dollars in VC in NYC remains high. Additionally the New York Tech scene continues to grow and mature.
Coming out of the breakfast, my biggest takeaway was the excitement surrounding the industry, but also the importance of becoming an expert at the step-by-step company building process, the importance of resilience, and the value of having high-quality mentors along as guides on the entrepreneurial journey.
Natalie Baer is a first-year MBA student at Columbia Business School and InSITE Fellow. She has worked as a Program Development Manager at Ocean Thermal Energy Corporation and as a specialist at Deloitte’s China Research and Insight Center.