Incubators for Ohio Startups: UPDATED
We’ve updated our compilation of startup incubators in Ohio. One notable addition, specifically for Cleveland-based startups, is Dan Gilbert’s Bizdom U, which launched in May 2011. Our goal is to have this resource be as complete and accurate as possible, so if you have any recommended additions or changes, please let us know.
The chart is embedded below, but you can access it directly by clicking here.
A Free and Potentially Valuable Startup Resource: Startup America Partnership
Last year, in conjunction with the Obama Administration’s efforts to spur economic growth and job creation, it announced the launching of the Startup America Partnership, an independent nonprofit NGO whose goal is to help young companies with high growth potential. A year into the project, we looked to see what it offers and the ways in which it will help your company grow.
It’s free and easy to join. The requirement is that you are a for-profit startup with at least two people founded since 2006, or a for-profit rampup or speedup with at least six people founded since 2001. You also must provide your EIN or SSN, basic revenue information, company website, and your company and personal LinkedIn profiles.
What do you get in return? Startup America provides unique member-only offers, such as discounts on HP business products like desktops, notebooks, ink and toner; the opportunity to apply for capital investment from Intel, which pledged $200 million to invest in Startup America companies; or a 50% discount on all campaign fees raised (up to $30 million) on IndieGoGo. It also provides numerous educational opportunities in the form of workshops and seminars from Cisco, Ernst & Young, and Microsoft, among others. Finally, it provides a grassroots forum to support regional startup ecosystems – Ohio is not yet listed.
With over 3700 unique deals for members, and other networking opportunities, it may be worthwhile to check out the full list of offers and determine whether your company will benefit by joining.
Don’t Be Evil: The Lowdown on Google’s New Privacy Policy
When Google filed an S-1 for its 2004 IPO, one of the sections in Larry Page and Sergey Brin’s letter to shareholders was titled “Don’t Be Evil.” According to the prospectus, the founders’ belief was that Google’s long-run interests would be better served if it “does good things for the world even if we forgo some short term gains.” Since Google’s 1998 founding and its 2004 public offering, it has evolved from a powerful search engine provider to a company whose diverse set of products are used daily by millions. With growth came speculation and criticism that Google did not live up to its “Don’t Be Evil” standard.
Its latest privacy policy change has brought more criticism that Google has broken its oft-cited, unofficial motto. A privacy policy is a disclosure document, whose purpose is to inform consumers on how a website deals with consumer information i.e. the type of information a website collects from its users, the ways it will use that information, and with whom it will share it.
So is Google now going to use your personal information for world domination? It’s tough to say, but here’s what the new privacy policy actually does: it consolidates multiple privacy policies for various services into one, and explicitly states that it will now use information about a user from one of its services in all of its other services. So, if you use Gmail, Google will now be able to use the information it gathers about you from your emails and use this for targeted ads in, say, YouTube. Keep in mind, it will only do this if you’re using Google services while logged-in to your account; and it won’t sell your data to third parties. On the other hand, the only way to opt-out of the new policy is if you stop using Google services — so, you basically can’t opt-out of the new policy.
One thing is certain: Google is being very vocal about informing its users of this policy change. Since announcing the change, it has barraged its users with notifications, such as the now-familiar “This stuff matters” pop-up. This follows some recent court decisions questioning the common practice of simply relying on users to stumble upon your changes, providing more transparency to users; if the change is important and you expect it to be binding on users, steps must be taken to ensure users actually see the change. Google’s aggressive tactics in informing users of its changed policy could set a new internet standard for dealing with such issues.
Legislative Update for January, 2012
Filed under: Corporations, Funding, Internet Law, Securities, Startups
Each month the Gillespie Law Group compiles the most recent legislative and regulatory developments that could affect startups, tech companies, and website owners.
“Crowdfunding” Update: As we reported last month, the House approved the Entrepreneur Access to Capital Act, H.R. 2930, known to many as the “crowdfunding” bill. This bill would allow businesses to raise money selling unregistered securities using “crowdfunding,” which is the raising of money through mass aggregation of small investments. Although the bill is strongly supported by the Obama administration, the Senate corollary bill, the Democratizing Access to Capital Act, S.1791.IS, is having a hard time getting out of the Senate because of efforts by the North American Securities Administers Association (NASAA) who has been lobbying heavily against the bill because it would infringe on state regulatory power. Additionally, the bill has been slowed because of two Senate hearings that highlighted the potential for increased fraud under the bill.
The House version of the bill would allow issuers, in any 12-month period, to raise up to $2 million if the issuer provides potential investors with audited financial statements, which is not always cheap. Crowdfunders then must comply with a variety of protective measures including warning investors that certain risks are associated with the issuer and that resales are restricted, as well as by providing the SEC with certain other information. Importantly for crowdfunders wanting to avoid SEC registration, investors who purchase securities under the crowdfunding exemption would not count toward the 500-shareholder threshold for SEC registration in Section 12(g) of the Securities Exchange Act of 1934. The Senate version of the bill does have some significant differences from the House version:
- Securities could only be issued through a “crowdfunding intermediary,” which would exclude raising funds through websites like Facebook and Twitter
- Each investor would be limited to investing only $1,000 in any 12-month period
- While the House bill preempted State registration law, the Senate bill would allow for some State registration requirements
A second Senate bill over this issue is also in the Senate, S.R. 1970, painfully entitled “CROWDFUND,” for “the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act.” The CROWDFUND bill even more narrowly defines what intermediaries investments can be sold through as “funding portals” and investors are limited to the greater of $500 or a 1-2 percentage of his or her annual income, per company to invest in.
General Solicitation. In addition to the the Access to Capital for Job Creators Act, H.R. 2940, the House bill we reported on last month, the SEC’s Advisory Committee on Small and Emerging Companies had made formal recommendations that the SEC should permit general solicitation and advertising in private offerings under Rule 506 where the securities are only sold to accredited investors.
The Access to Capital of Job Creators Act, which passed in the House, would amend Section 4(2) of the Securities Act of 1933 by exempting from SEC securities regulation “transactions by an issuer not involving any public offering, whether or not such transactions involve general solicitation or general advertising.” Importantly, both this bill and the SEC Advisory Committee’s recommendations would generally go against the long-held goal of the securities exemption rules of prohibiting general solicitation of investors by general and open advertising. Instead, both would actually permit general solicitation or advertising provided that all purchasers of the securities are accredited investors and that the issuer has taken reasonable steps to verify that purchasers of the securities are accredited investors.
Internet Law. SOPA and its detractors became major news in the past month with websites such as Google and Reddit actually removing their services from the web for 24 hours on January 18. Recently SOPA and PIPA, a similar bill in the Senate, have been opposed by President Obama and have seemingly been shelved for the time being, however it is likely that new legislation or changes to these proposed bill are coming. For an in-depth look at SOPA, please read our analysis of the bill: SOPA – Cutting Through the Hype.
SOPA – Cutting Through the Hype
This article was published on January 18, 2012 and the information contained within may become inaccurate as the bill, its support, and opposition continue to rapidly evolve. This article is longer than our typical blog post and continues after the jump.
Much has been written about the Stop Internet Piracy Act (SOPA) in recent months – most of it important, all of it passionate, but through all the fervent positioning, the actual contents of the proposed bill can easily be missed. The purpose of the bill is to expand intellectual property protections on the internet by making it easier for content owners to stop the spread of infringing materials on foreign-based websites. However, the bill has received pushback by vehement detractors who believe that SOPA will lead to abuse of websites by copyright holders, infringe on free speech rights, and possibly even disrupt the functionality and security of the internet. The purpose of this article is to wade through the hype of what the bill does and does not do and to discuss what will actually happen to website owners if SOPA passes in its current form. SOPA has a corollary bill in the U.S. Senate entitled the PROTECT IP Act, also known as PIPA, which has many of the same purposes as SOPA. This article focuses on SOPA because, as it currently stands, most of the effort and emphasis in Congress and the media is on SOPA. If SOPA fails, PIPA may become the more important bill.
SOPA was introduced in October of 2011 by Representative Lamar Smith and quietly gained widespread support from both sides of the aisle as well as from many businesses and arts organization. Because of the huge initial push, SOPA seemed destined to fly through House. Because this bill would primarily benefit very few (mostly large media corporations) to the detriment of many (most internet users), quick and quiet passage was likely its best chance for making its way out of the House and into the Senate. However, opposition for the bill built quickly after a widely publicized committee hearing where supporters of the bill and members of the House failed to show a strong understanding of the implications of the bill. Since then, SOPA has been hotly debated and will likely not see a full House vote until March 2012.
What is perhaps most important to understand, and can be easily lost in the push and pull of the debate is that SOPA is intended to block infringement only of foreign-based websites and has actually been amended to make this more clear. While there are certainly legitimate complaints about SOPA, the idea that SOPA can be used to shutdown U.S. sites like Google and YouTube is now no longer a reality. Read more
Entrepreneurs Shouldn’t Wait to Think About Intellectual Property
Filed under: Copyright, Intellectual Property, Startups, Trademark
This post originally appeared as guest blog post on The Metropreneur Columbus.
There are a million and one things to think about when launching a new business − from employees, partners, suppliers, lenders and investors to just making a product that works and that people want to use. It can be tempting to let many legal issues slide. However, for several reasons, properly identifying and protecting your intellectual property assets should be viewed as a priority from the very beginning.
Protecting Value
Protecting your intellectual property preserves the value you create in your company in two main ways.
First, there is value in the brand you are creating and developing, i.e. your name and even your look and feel. Apple’s brand itself is estimated to be worth $153 billion− almost half of its market capitalization. Trademark protection is the primary method by which you will protect your brand. However, not all brands can be protected by trademark. You should not invest time and money in a brand until you know that it qualifies for trademark protection.
Second, you are creating value in the original aspects of your products or services, original content you create for marketing or other purposes, original processes you design that create efficiencies or otherwise give you a competitive advantage, or other aspects of your “secret sauce.” Intellectual property tools, such as copyright, patent and trade secrets, allow you to protect your “secret sauce” from misappropriation by others. It is important to understand when you are creating intellectual property assets in your business and takes the necessary steps to protect them.
Monetizing Value
Intellectual property tools are not just defensive mechanisms, however. They are also the means by which you identify value so you can “monetize” it, i.e. sell it, license it, or even use it as collateral for a loan.
A useful analogy is the tools used by ranchers (branding irons, fences, etc.) to identify and separate their cattle from both wild cattle and cattle owned by others. If you can’t point to it and prove you own it, lenders, investors, and potential buyers are unlikely to attribute any value to it.
Trademarks, patents, copyrights, and trade secrets are the tools that enable you to point to and prove you own the intellectual property assets you’ve created in your business. A properly maintained intellectual property portfolio can generate much more favorable terms for a bank loan or investment, additional revenue streams via licensing deals, or even a significantly higher price paid for your business should you sell it in the future.
Experienced entrepreneurs know that planning for a new business, right from the beginning, should include careful consideration of how you can create valuable intellectual property assets and the steps you need to take to protect and monetize them.
Trying to Raise Money? Pre-Plan for a Smooth Transaction
Filed under: Corporations, Funding, Intellectual Property, Startups
Prior to entering into negotiations with an angel investor or venture capitalist there are multiple due diligence-related items the VC will want evaluate in order to make the decision whether to invest in your company, and if so, how much they want to invest. Failing to properly plan for these issues can at best slow down the process and at worst completely derail the deal. However, the good news is that with some forethought and preplanning, you can have many these issues squared away from the beginning.
Register Your Company
First, regardless of whatever entity type you have chosen (Delaware C-Corp is the most typical for venture capital investment), you need to make sure that you have properly registered with the formation state and that all of your formation documents are in place and organized in a way that can easily be shared with an investor. These documents should clearly state the ownership, include vesting provisions for the founders, and be structured in a way that will allow for future investment from outside parties without too much procedural difficulty. Additionally, it is important to keep detailed corporate records. The lawyer who helps you with your initial formation can help you understand and plan these details.
Intellectual Property
When it comes to intellectual property, an investor is going to want assurances that no one outside the company will have any claim to the IP the company claims to own. To do this, somewhere in the company’s formation agreements should be language that assigns all IP to the company and if not, it should explicitly outline what is owned by whom and under what arrangement the Company is using those rights. Additionally, you may want to have started registering any trademarks, copyrights, or patents your company has created.
Contractual Agreements
Similar to IP ownership, you should make sure to have all of your contractual agreements solidified. This includes everything from referral agreements to perhaps the most important, employment agreements. You should be able to identify who is an employee and who is an independent contractor and have the documentation to back it up. Not only will documentation suggest to the investor that you are highly organized and a good investment, but these agreements will ensure no surprises down the line with employees and independent contractors, regardless of whether there is impending investment or not. Employment issues, especially when dealing with intellectual property ownership, can be a particularly difficult problem if not dealt with early.
Having these issues dealt with before engaging with an investor will help to ensure smoother negotiations and possibly more company-friendly terms once V.C. or angel investment becomes a reality. While you may be able to handle some of these issues on your own, your lawyer can help to ensure that some of the trickier issues like vesting provisions and intellectual property assignment are completed properly.
What’s the Deal With the Facebook Settlement?
This past Tuesday Facebook agreed to a settlement with the Federal Trade Commission regarding its ever-controversial privacy policy. The complete settlement can he found here. The charge against Facebook was that that company deceived consumers “by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public.” Of the several points that Facebook agreed to, two are most important for other website owners to consider:
• Facebook can no longer make misrepresentations about the privacy or security of users’ personal information.
• Facebook must obtain consumers’ affirmative express consent before implementing changes that are in contrast to users’ privacy preferences.
As Facebook has been on the forefront of internet-based privacy issues in the past few years there are several instructional points for website owners to take away from the suit and settlement.
First, as Jerry Seinfeld once explained, any restaurant can take a reservation, but it’s another thing to actually fill the reservation. Likewise, while most websites have already realized that their privacy policy must actually be tailored to their website (rather than copy and pasting from someone else’s privacy policy), website owners must take the additional step of actually following their policy. A privacy policy not only serves to inform users, but it sets guidelines that the website itself must follow. A company that doesn’t follow its own privacy policy can get into costly trouble.
Second, it is now clear that if you are changing your privacy policy, you must adequately inform your users. While some users may not be that concerned about how public their personal information is, some users will care quite a bit. If you are going to change the policy in a material way, you will need to do more than just change policy on your site and hope users will notice. You must keep your users updated on what you are doing with their information or else there will be no soup for you!
Third, the Facebook settlement may represent the final tidal wave in the sea change from opt-out privacy options to opt-in. Facebook liked to change its privacy options by making users’ personal information public and then asking users to “opt-out,” meaning that the information was first made public, then users had to manually find the option and click the option to make it private. Now, when Facebook wants to change its privacy protocol, the personal information will be kept private until the user chooses to allow the information to be public, thus “opting-in.” Opt-in privacy options are likely to become the privacy norm and depending on your business model and how you use your users’ information, you may be well advised to follow this principle in your own privacy practices.
New gTLDs Offer Updated Approaches to Web Addresses and Branding
In June of this year, the Internet Corporation for Assigned Names and Numbers (ICANN) voted to allow a new program for the creation of new generic top-level domains (gTLDs), the end section of a web address, like .com, .org, and .net. These new gTLDs will offer new opportunities for brand owners and other parties who register them, but at this point should not be too much of a concern for brand owners who choose not to apply for them.
Prior to this new program, the amount of TLDs was limited to just 22 in the US and country codes like .uk and .ca (and yes – .ly was intended for Lybia, although it has taken on a life of its own in the link shortening sphere via bit.ly). However starting in January of 2012, ICANN will begin accepting applications to apply for new gTLDs. During the first year of registration, ICANN plans to allow for the creation of 300 to 1,000 new gTLDs in 2012. The application fee comes in at the very serious figure of $185,000 with additional fees likely further along in the process.
Perhaps the most important aspect of being granted a new gTLD is that once a gTLD is created, the party who was granted it will own it and be responsible for administering domain names with that gTLD extension. For businesses, there are two important types of gTLDs that applicants might consider applying for. First are branded TLDs such as .apple or .hp and second are more general gTLDs like .bank or .car. Because of the high cost of registration and possible ways to use them, each type of new gTLD offers very different incentives and potential value for applicants.
Branded gTLDs
The allure of a branded TLD should be fairly obvious. It would streamline web addresses and a branded TLD would lend a strong sense of gravitas to a brand, as only elite brands would have either the need or money to have their own TLD. Companies with strong consumer identification as forward-thinking, elite, or even luxurious, such as Apple or DKNY might be well-served with a branded TLD. For instance web addresses like as http://ipad.apple or http://menswear.dkny would make for nicely streamlined and brand-centric web addresses – much better than having the cumbersome .com attached to the address. However, consumers are undoubtedly comfortable with extensions like .com and with the high cost attached to obtaining a branded TLD, there is a real question of whether obtaining the TLD would be economically worth it. Likely, it will take one large company to obtain their branded TLD and pioneer the proper utilization of it.
Trademark and brand owners have expressed concerns about cybersquatters or other parties obtaining their marks, especially since there is no reservation process available for the new gTLDs. However, these mark owners will likely have little to actually worry about. First, unlike the very easy process for obtaining domain names, application process for the new gTLDs will be complex, take from 9-20 months, and take into account many variables including worldwide trademark statuses. Second, mark owners can object to filings, although it is likely that the objection process itself will have high costs associated with it. Third, while the high cost of registration will keep most brand owners from registering, that same high cost will likely deter most cybersquatters as the high cost and intense scrutiny will make it unlikely that cybersquatter will be able to obtain the branded TLD in the first place.
Non-Branded gTLDs
The other types of applications will be for non-branded TLDs like .bank or .law. The appeal of owning a TLD like this is that a party that owns the TLD then has full control of all domains within that TLD and can do whatever it chooses with them. A TLD owner could choose to sell domains at a high cost or block any other party from obtaining them. For instance, if Chase Bank obtained the .bank TLD, it could sell domains under it for a million dollars or be the only bank using the TLD. However, it remains to be seen how consumers will react to these TLDs and whether such approach will be worth the high cost of registration. Like the branded TLDs, the popularity and value of non-branded TLDs will likely depend on a visionary owner to show how to properly use and profit from these new types of TLDs.
For those interested in knowing what gTLDs are likely to be applied for in the coming year, dot-nxt.com is keeping a list of all the likely candidates and their corresponding sponsor. Just a few of interesting upcoming generic applicants include .bank, .app, .bike, and .dental. According to the same site, some of the upcoming branded applicants include .canon, .deloitte, .motorola, and .unicef.
Even for brand owners that do not plan on registering for their own gTLDs, it is advisable to keep a watchful eye for registrations that may infringe on domain or trademark rights. New gTLD applicants can be monitored by using services like dot-nxt.com, newtlds.tv, Valideus, or registries.tel. Additionally, brand owners should be prepared to submit comments, objections, and questions to ICANN should they become aware of possible infringing registrations. The possibilities of usage and optimization are wide-open and a prudent website or brand-owner should keep an eye on developments in this area as they occur as the best practice of wait-and-see may change.
“Isn’t My Domain Name Enough?” – The Interplay Between Domain Names and Trademark Protection
There is a common misconception that having a registered domain name is all that is needed to protect a brand identity. However having only a registered domain name will make it much harder and more expensive to protect against infringing domains or other types of infringement. This is where trademark protection comes in. Trademark registration will aid in protecting both your brand identity and domain rights. Simply, registered trademark rights strongly protect domain rights, but domain rights without a registered trademark will offer only minimal protection against both domain name or trademark infringement. Therefore, when economically feasible, a company with a domain name should register the name as a trademark as well.
A registered trademark is the best and most economical way to stop unauthorized domain name registrations or use. This could happen if you own “example.com” and someone registers “example.biz” and is operating in a way that is similar to your website. If you have your name registered as a trademark you can stop the infringing party’s use of the domain name through federal lawsuit or through the independent international organization, ICANN, that oversees domain disputes. This can also be helpful if you somehow forgot to renew your domain registration and another party swoops in to take the registration. Additionally, having the trademark registered will allow you to stop parties from using your trademark in online advertising such as with Google AdWords as well as online auction sites like eBay.
It should be noted that these avenues of protection are available without trademark registration, but if you have a dispute you will still have to prove to a court that you are entitled common law trademark rights based on usage of the mark, which will be difficult and costly. This is true for both traditional trademark infringement situations like somebody using your name as well as for domain infringement issues like cyber-squatting. From an economic perspective, if you end up having a situation where someone is infringing on your rights, it will cost much more to protect yourself than if you obtained trademark rights in the first place.
Having a proper domain name is an important beginning step for a business with an internet presence, however it offers little legal protection. The best bet to protect your company’s brand as well as domain rights is still to obtain federal trademark registration.
Stay Informed
