Legal Commentary

Entrepreneurs should be investor ready - for themselves

By David Canton

That’s the title of my weekly Slaw post for today. 

It reads as follows:

Lawyers often talk about how entrepreneurs should make their companies ?investor ready?. This uses the term ?investor? in the widest sense, meaning everything from a bank loan, to a VC investment, to the sale of the business to Google that allows the owner to retire early in luxury. By ?ready? we mean being able to easily survive investor diligence without risk of losing the deal or diminishing the value - by having taken all the right steps and having the right documentation for such things as an up to date corporate minute book, trade-marks for brands, documenting IP ownership, proper employment agreements, privacy policies, etc.

Our harping on this sometimes falls on deaf ears. Perhaps the owner needs to focus on its product and sales (being investor ready after all means nothing if there is nothing to invest in), or doesn?t want to spend money on lawyers, or thinks it is important but not urgent.

I was one of three speakers last night talking about intellectual property issues at the TechAlliance Entrepreneur 1.0 course. All 3 of us mentioned this.

The best perspective came from Colin Macaulay - Director, Research and Development of Viron Therapeutics Inc. Its one we should keep in mind when talking to clients.

He said entrepreneurs should keep in mind that they themselves are investors in their own companies. They should be their own harshest critics and do their own diligence in order to maximize and protect that investment.

A person?s business is probably the biggest investment they have, so owners should be vigilant to do what is necessary to maximize the value of the business. In essence, a business owner is better off doing continuous diligence on their company as if they have a continuous exit strategy. It leads to better decisions and doucumentation along the way. While it may seem like a daunting task, it is in reality far easier and better in the long run to approach things this way than to have to scramble to try to pull everything together after the fact to meet a pressing need, or to try to deal with problems that others find.

Full post as published by eLegal Canton on October 15, 2008 (boomark / email).