Greetings from New York City, where I’m attending a venture capital law conference. I’m happy to say that rumors of the demise of VC funding appear to be premature, but expect a shakeout among VC’s in the next year or so. The 10-year returns (looking back to 2000, the year the dot-com bubble burst) in the industry are pretty grim. According to one study I saw, 19 out of 57 well-known venture funds have made negative returns, and the limited partners who put up the moolah are getting antsy.
On a legal note, one of the tidbits that VC’s have for startups is … make sure you have the proper intellectual property assignments in place with founders, employees and consultants (for my PANMA and PSL friends, that means: DEVELOPERS) to transfer ownership of all intellectual property rights to the startup entity. VC’s look for this when they do their due diligence for funding transactions, and you can bet your startup keister on the fact that everything will be given an even more penetrating once-over at the time of an exit event like an acquisition or IPO. If these assignments are not in place, your startup could end up being an unintentional co-owner of its product with someone else, who may be able to sell or license it independently as they see fit. In fact, I blogged about the need to nail down ownership last May, so you know how near and dear this issue is to my heart.
Someone else co-owning your patents or copyrights is NOT good for your valuation! If you need an IP audit or want to get IP ownership buttoned up, please give me a call. I always have time for startups.