tag:blogger.com,1999:blog-27325396124295467742024-03-05T22:33:02.644-08:00Your Own GCA perspective on Silicon Valley from a quiet hilltopLonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-2732539612429546774.post-35076720763483545472017-01-18T20:45:00.001-08:002017-01-18T21:14:44.567-08:00"Why is our legal department growing faster than the rest of our company?!" As in-house legal functions grow and add staff, sometimes the rate of their growth actually exceeds that of other, perhaps revenue-generating, functions or the company as a whole. This leads executive teams, boards of directors and especially Chief Legal Officers and Chief Financial Officers to ask a perfectly reasonable question: why?<br />
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There are a few simple reasons that a corporate legal department could see rapid growth. Occasionally a legal function is only created late in a company's life cycle. In those situations, many legal needs have gone unmet for years. There will be a great deal of catch up and clean up to do. This will often require rapid and substantial hiring to create an effective legal function.<br />
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Sometimes a company is undergoing a unique set of changes, such as preparing for an initial public offering, acquiring other companies at a rapid pace or entering into a new business with significant regulatory or other legal-intensive implications. These situations will also require growth in the legal department.<br />
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In my view, these are all "good" reasons for a legal function to grow.<br />
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But in many cases a legal function gets bigger because of more nuanced factors. And that growth isn't always a good thing for the company. <br />
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As legal functions develop, a great deal of attention is paid to their skill sets, workload, responsiveness, tolerance for risk and personalities. Not as much focus is afforded to two critical factors: First, whether those individuals in the legal function are the right people to be doing a certain piece of work. Second, whether the timelines expected of the legal function are reasonable for the assigned projects given the cost.<br />
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As to the first factor, many established companies in particular have grown to like the skills that legal professionals bring to the table. They are capable writers and communicators, team players and analytical thinkers. But, even in-house, they are still expensive resources. So, it's not always efficient to leverage lawyers to do work that can be done by other functions. I have seen in-house legal professionals do everything from fill out order forms, put together responses to requests for proposals, pick up computers from departing employees, write press releases and set up meetings between sales teams and revenue recognition experts. Having legal teams spend time on these activities may seem like they help the organization at the time, but they also increase costs substantially and cause legal functions to grow bigger.<br />
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The second factor also impacts legal department size and spend. When requests presented to the legal function are consistently marked "urgent," legal functions need staff to respond appropriately. Pushing back on aggressive timing isn't always comfortable or culturally accepted, especially by more junior legal staff who may not have visibility about whether a particular assignment is truly urgent for the company to succeed. Yet, staffing will generally need to increase to satisfy widespread demands for projects to be completed "yesterday." Experience and judgment are needed to solve these challenges. It may be helpful to establish basic service level agreements to align expectations with a company's tolerance for legal expenses.<br />
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These more nuanced factors are not necessarily healthy drivers of legal department growth. It's beneficial for General Counsels and their fellow executives to analyze the reasons for growth, what exactly their teams are being asked to do and whether the timelines they are working under are reasonable for the circumstances.<br />
<br />Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-28498854179924603852015-04-06T13:15:00.001-07:002015-04-06T13:15:04.947-07:00Five requirements of corporate culture for building an effective in-house legal function<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">In my nearly 20 years of corporate legal experience, I have built </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">in-house legal functions, helped lead large, existing functions and </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">yet also advised in-house lawyers as outside counsel. During this </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">time, I have observed that the success of an in-house function will </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">depend not just on the ability of the in-house legal professionals</span><br />
<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">running it (which is obvious), but also on the cultural receptivity to </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">legal in the "host company." As a result I have come to believe that </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">there are five very important guidelines - prerequisites even - to </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">ensure a corporate legal function's success.</span><br />
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<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">The first is being very specific with respect to your job </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">specification in terms of both qualifications and personality type. </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">Stick to that with conviction. Is industry experience required? What </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">substantive areas of law are really arising on a regular basis? That </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">should be aligned with the ideal candidate's background. As far as </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">personality type is concerned, consider that a spectrum exists with </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">"forceful change agents" and "peacemaking cooperators" at the extremes </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">- what type is best for your organization? When ready to go find that </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">right person, make sure you understand the difference between hunting </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">and hiring. It will drive the recruiting approach and likely </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">determine whether you end up with a superstar or somebody who just </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">needed a job.</span><br />
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<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">The second requirement is to be very explicit, internally and </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">externally, about what kind of role is being created when the legal </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">department is launched. This is all part of good human resources </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">practices in providing a candidate with a realistic job preview. There </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">are basically two types of legal functions that get created with the </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">first hire. There is the best practices function and the...well, not </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">best practices function. In a best practices function, the candidate </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">will have either a Chief Legal Officer or General Counsel title, will </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">be a named executive officer and paid accordingly, will officially be </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">part of the most senior executive team, will participate in all board </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">meetings, will act as the company's lead decision maker on legal </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">issues, will report directly to an engaged CEO and will have the </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">authority to hire and fire outside legal vendors. It is possible to </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">create a legal function where these practices are not present. </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">However, it's important to make sure that the candidate is acutely </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">aware of the landscape so that expectations are not mismatched. A </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">great deal of confusion can be created when legal departments are </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">established with some good practices but not all - this can create </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">tension as the function tries to develop.</span><br />
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<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">The third cultural requirement is to appreciate the need for a legal </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">function to play a major role in developing a risk management </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">philosophy for the entire corporation. Many corporations evolve </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">without any kind of risk management philosophy. This results in those </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">companies being very aggressive in certain situations but skittish in </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">others, without there being any rhyme or reason for these approaches. </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">This leads to unpredictable behavior that can frustrate investors, </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">partners and employees. An effective legal function will help the </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">company develop a consistent and rational risk management approach </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">that fits with the company's point in the corporate lifecycle. Allow, </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">encourage and expect your legal function to play this role.</span><br />
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<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">The fourth need is to understand the impact that cynicism about the </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">legal profession has on corporate America. Some of that cynicism is </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">warranted. But some of it is not. The reluctance to engage "pricey and </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">pedantic" transactional lawyers, for example, can create problems down </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">the road when poor contracts turn into conflicts. This has a draining </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">effect on the ability to maintain a cost effective and proactive </span><span style="background-color: white;"><span style="color: #222222; font-family: arial, sans-serif;"><span style="font-size: 12.8000001907349px;">function. What's more, it can create a vicious cycle. Companies </span></span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">that ignore or don't seek out legal advice because "those crazy </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">lawyers are so cautious and expensive," will often end up only </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">spending more money on legal services to reactively clean up messes. </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">Make sure your organization is really open to legal advice.</span><br />
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<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">The fifth point is to ensure adequate resources and in fact require </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">immediate hiring where the volume demands it. This also helps avoid </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;">chicken and egg situations. For instance, a legal function won't have any internal credibility if it can't responsively review commercial contracts. But, it can't be responsive if it's not adequately</span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8000001907349px;"> staffed.</span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com1tag:blogger.com,1999:blog-2732539612429546774.post-7172621993247713272014-02-16T20:02:00.002-08:002014-02-16T20:02:35.809-08:00How a ton of good luck can be bad and a little bad luck can be good <div class="MsoNormal" style="text-align: left;">
<a href="http://hardthings.bhorowitz.com/" target="_blank">The forthcoming book by venture capitalist Ben Horowitz, The Hard Thing About Hard Things</a>, figures to be fantastic. <a href="http://www.bhorowitz.com/why_i_did_not_go_to_jail" target="_blank"> He recently blogged about one of his career experiences as a sort of teaser. </a></div>
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In his blog he writes about an experience that, had he handled differently, might
well have caused him to go jail.
Having the opportunity to hire a star CFO at one of his companies, he
jumped at the chance. The CFO
recommended a change to the company’s stock option practices that could
potentially have benefited the employees. </div>
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But Horowitz was already a believer in a strong legal
function and had his General Counsel review the suggestion.<span style="mso-spacerun: yes;"> </span>The General Counsel believed that the
practice was illegal and recommended against it.<span style="mso-spacerun: yes;"> </span>Horowitz followed his General Counsel’s advice.<span style="mso-spacerun: yes;"> </span>Years later, the same CFO would be
accused of wrongdoing by the SEC for stock option granting practices at a prior
company.<span style="mso-spacerun: yes;"> </span>She was asked to leave
the Horowitz company and ultimately did spend a few months in jail.<span style="mso-spacerun: yes;"> </span>It sounded like a difficult period for
Horowitz and one that left a long term impression.</div>
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This challenging episode is a great reminder to me that, in
Corporate America, a little bit of bad luck can be good and a ton of good luck
can be bad.<span style="mso-spacerun: yes;"> </span>This seems counter
intuitive at first so I will explain.</div>
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A few rough seas of the sort Horowitz experienced in his
introduction to creative stock option practices can be a valuable learning
lesson.<span style="mso-spacerun: yes;"> </span>He had enough bad luck to forever
remember the lesson but not so much as to sink his company.<span style="mso-spacerun: yes;"> </span>I imagine that today Horowitz feels
even more strongly that an effective General Counsel will report to the
CEO.<span style="mso-spacerun: yes;"> </span>That creative accounting
isn’t necessarily a good thing.<span style="mso-spacerun: yes;">
</span>And that lawyers who simply speak the truth and are heard are an
executive’s best protection against going to jail.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span></div>
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By contrast, companies, executives and boards that have had only
good luck tend to lack these war stories.<span style="mso-spacerun: yes;">
</span>They don’t have the tough learning experiences to draw upon.<span style="mso-spacerun: yes;"> </span>It’s not so much that they are certain
to be more reckless, but rather that they may not consider the importance of
compliance or ever think about the events that could destroy their businesses
or careers.<span style="mso-spacerun: yes;"> </span>That is, all the good
luck is a bad thing – it exposes their blind spots and allows them to become tolerant
of sloppiness that hasn’t (yet) caused major problems. As a result, a sort of quiet bliss makes
them more susceptible to big failures that more seasoned, perhaps hardened,
business people will know how to avoid.</div>
Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-56098055840572611322013-02-26T22:25:00.001-08:002013-02-26T22:25:54.876-08:00Spin only making Yahoo's bad new policy worseYahoo's latest move to try to shake itself out of the doldrums is <a href="http://www.businessinsider.com/yahoo-working-from-home-memo-2013-2" target="_blank">an edict that bans telecommuting</a>. The new policy and the memo that dictates it to employees are both pretty bad.<br />
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The memo says, "Speed and quality are often sacrificed when we work from home." The solution is not working smarter, harder, more efficiently or with better use of technology, but rather just being "physically together." No data is provided as to how being "present in our offices" will solve anything. No explanation of the pros and cons of telecommuting is given. The memo is a superficial collection of flowery phrases offered up in the hope that they will be accepted as fact.<br />
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What's really needed in these situations is policy that recognizes the modern way in which global technology work gets done and finds the right balance among a wide variety of activities. Technology company leaders should want to encourage people to put in the hours necessary to do great work, wherever they might be. In-office or out-of-office is a secondary outcome. In-office work can help in collaboration, team building and communication-related activities. Out-of-office work, away from meetings and other office attractions (food, ping pong and friends), can facilitate efficient consideration of product strategy, long term planning and development of...well, better core human resources policies.<br />
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But where the "no working from home" policy goes from bad to just plain weird is some of the spin that has accompanied it. <a href="http://www.businessinsider.com/why-marissa-mayer-told-remote-employees-to-work-in-an-office--or-quit-2013-2?0=sai" target="_blank">One recent report provided extensive justifications on the new policy from someone close to the issue, presumably an insider</a>. This source suggests that the policy came about because some employees were poor performers and "not productive." These people will theoretically quit rather than comply with the new policy, which would be a good thing for the organization. So, the source suggests, CEO Marissa Mayer sees this as "a layoff that's not a layoff." <br />
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For this, the source suggests that Mayer "turned out to have a lot of courage. She's dealing with problems no one wanted to deal with before."<br />
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This makes no sense. Yahoo seems to be having a problem with productivity<i> and</i> with management. If some remote employees are not productive and yet it takes a complete ban on remote work as the solution, then it's clear that those employees <i>and</i> their managers were poor performers. What's more, there is nothing courageous about using a broad and rigid policy to achieve "a layoff that's not a layoff." It's much more passive-aggressive than courageous. And more passive-aggressive leadership is the last thing corporate America needs.Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-62371460819597387272012-12-22T08:09:00.000-08:002012-12-22T08:09:31.945-08:00Why the TechForward victory over Best Buy is so gloriousIn some respects, <a href="http://techcrunch.com/2012/12/05/techforward-wins-27m-in-lawsuit-against-best-buy-over-stolen-trade-secrets/" target="_blank">Best Buy's theft of trade secrets from startup TechForward</a> is a fairly routine matter. Small company pitches idea to large company. Large company signs an NDA. But large company likes the idea so much that it basically makes the idea (and the methodology behind it) its own.<br />
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The <a href="http://redeye.firstround.com/2012/12/why-first-round-capital-funded-a-lawsuit.html" target="_blank">context around the resulting litigation, however, described in a blog post by a venture capitalist whose firm funded TechForward</a>, is fascinating. For me, it's also uplifting. "Send your business plans to these guys" inspiring, in fact. And not merely because TechForward won the lawsuit.<br />
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First and foremost, the venture firm, First Round Capital, really understands the importance of the little guy in the technology world. In deciding to fund a lawsuit against Best Buy, where many would have just moved on, First Round was speaking with actions, not just words, about sticking up for the entrepreneur. First Round partner <a href="https://twitter.com/joshk" target="_blank">Josh Kopelman</a> wrote, "If big companies believe they can violate agreements with immunity because a startup can't afford to sue them, it is bad news for every startup in the ecosystem."<br />
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There are a couple other great learnings from this story. NDAs, those throwaway documents so many business people sign without reading or don't bother to sign at all, can really become a critical agreement that governs the course of a relationship - always make sure you get them reviewed by counsel and signed. Finally, the litigators that some business people like to point to as "the problem" were, in this case, the solution - while the Best Buy business people were crass and manipulative, the TechForward lawyers saw that justice was done.<br />
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Congratulations to the teams at TechForward and <a href="http://www.firstround.com/" target="_blank">First Round Capital</a>. And thank you, from all of us who work with emerging technology companies.Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-3518981943773075772012-08-11T07:38:00.001-07:002012-08-11T07:38:35.772-07:00Finally, mainstream media provides a balanced piece on copyright<span style="font-family: Trebuchet MS, sans-serif;">My experience is that the mainstream media struggles to explain legal issues. Often, in trying to simplify complex concepts, the meat gets trimmed beyond recognition. Other times the piece becomes an editorial, riding some populist wave that uses a famous case merely as a backdrop.</span><br />
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<span style="font-family: Trebuchet MS, sans-serif;"><a href="http://tech.fortune.cnn.com/2012/07/11/megaupload-cyberlocker-copyright/" target="_blank">A recent article in Fortune magazine</a>, however, hits the mark, providing a balanced perspective on the evolution of file sharing services, the related copyright law and what it all means. </span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">My favorite part is actually <a href="http://tech.fortune.cnn.com/2012/07/11/then-came-lola-seidler/" target="_blank">a sidebar that clearly illustrates </a>that the latest iteration of file sharing, the so-called cyberlockers, is not without victims. The common argument in favor of file sharing is that the artists will keep producing artistic works, but will find other ways to make money. The sidebar illustrates that this isn't always true. An independent filmmaker named Ellen Seidler went into debt to make a movie, only to see it pirated in over <u><i>56,000</i></u> locations. Seidler said she "probably won't" make another movie in the wake of that experience.</span><br />
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<span style="font-family: Trebuchet MS, sans-serif;">Some may say that there is no real need to pay for music, for example, when bands make so much money from playing live. But people became fans of those bands that can fill big stadiums through conventional methods of music distribution. They paid money for CDs or MP3s, encouraging the bands to make more music, then tour. </span><br />
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<span style="font-family: Trebuchet MS, sans-serif;">Enjoy the articles. Then go buy a DVD of your favorite movie out of gratitude that the file sharing phenomenon didn't prevent the movie from being made.</span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-75986076360186162612012-03-18T21:39:00.002-07:002012-03-18T21:39:05.088-07:00Fenwick's valuable Venture Capital Survey celebrates 10 years<span style="font-family: 'Trebuchet MS', sans-serif;">"What is market?"</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">"What is the trend?"</span><span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">These two questions are heard frequently in Silicon Valley, but there is too often a dearth of local, original data to answer either one. For 10 years now, Silicon Valley technology law firm Fenwick & West has been addressing this need in the area of venture financings. </span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">A hands-on team at the firm publishes an in-depth quarterly analysis known as the Venture Capital Survey. The latest "anniversary edition" was released a few weeks ago for the fourth quarter of 2011 and is available on Fenwick's web-site <a href="http://www.fenwick.com/publications/6.12.1.asp?vid=21&WT.mc_id=2011.Q4_VCS_MKTG">here</a>.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">I read this report every quarter for a few reasons. First, the amount of data analyzed by the survey is remarkable. In the most recent survey, 117 companies that reported raising money in the fourth quarter of 2011 were analyzed. The financings are examined not just for valuation but for some of the key provisions that were used, such as liquidation preferences and anti-dilution features.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">Second, the results have a strong local flavor. The analysis covers Silicon Valley-headquartered companies, giving it a much more relevant feel for our ecosystem than national statistics. </span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">Third, </span><span style="font-family: 'Trebuchet MS', sans-serif;">the work is unique and original. M</span><span style="font-family: 'Trebuchet MS', sans-serif;">uch of the research on financing terms involves manual labor. About 10 Fenwick professionals are involved in putting the report together every quarter.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">Finally, the authors draw many interesting conclusions that help put the mountains of data into useful context about trends. In the latest edition, the authors state that some industries, such as Internet/digital media and software, are concerned about a bubble, while others, such as cleantech and life science, are having a tougher time. Against this backdrop, the detailed tables reveal that in the fourth quarter 80% of the software industry financings were up rounds, but only 29% of the cleantech transactions were up rounds.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;">To join me in subscribing to Fenwick's Venture Capital Survey, <a href="https://tikit.fenwick.com/reaction/RSGenPage.asp?RSID=869E00A8BC9F7CEBAC583821D31C18A9B8493910B56">click here</a>.</span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-56259632437744266742012-01-14T20:39:00.000-08:002012-01-14T20:39:16.127-08:00When both the coffee and the fancy lobby become an afterthought<br />
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<span style="font-family: 'Trebuchet MS', sans-serif;">Last year I spoke at a GigaOM conference. I was a panelist on one of my favorite
topics, engaging independent contractors using legally compliant models. But, while at the conference, another
panel about co-working caught my ear.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">One of the speakers was </span><a href="https://twitter.com/#!/donmball" style="font-family: 'Trebuchet MS', sans-serif;">Don Ball</a><span style="font-family: 'Trebuchet MS', sans-serif;">,
co-founder of </span><a href="http://cocomsp.com/" style="font-family: 'Trebuchet MS', sans-serif;">a successful co-working space in Minnesota</a><span style="font-family: 'Trebuchet MS', sans-serif;">. Co-working spaces are shared workspaces
where freelancers or even small startups can get a wifi connection, a few desks
(typically in a open, collaborative floor plan) and minor administrative
services in a reasonable, flexible fee arrangement. It is often thought of as the evolution of the typical corner coffee shop, with a bit more interaction among the customers. In other words, a
co-working space is the place to go when your day is less about the coffee and
more about productivity.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">Ball and others in this particular panel were making the
point that larger companies will increasingly take advantage of the co-working
trend. Even Fortune 500 companies
can find ways to utilize co-working concepts. After all, the core idea is that a technology-enabled
contributor does not need to physically be in any one specific location to be
productive. So, by essentially
setting their employees free to “roam,” the large corporation can save millions
by reducing its significant real estate footprint while potentially reaping
other benefits, such as happier employees and a more geographically distributed
sales force.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">Already, <a href="http://www.mbopartners.com/blog/rise-independent-called-out-big-trend-2012">it’s predicted that more than 50% of the private workforce will be independent by the year 2020</a>. These will be people utilizing new
places to work. Imagine adding to
that mix larger corporations that want to reap similar benefits.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">It is entirely possible that we are witnessing the beginning
of the end of the fancy corporate office space.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW_k8tU_bws5vnMPpiaOwk_ZtJfnJeS1r6FZ-8SSyrKIg5YokXm6TvX3PoDs3FzbTC6u_GgvDqb7Owk7I4DhxMKNGmhTQooQ54H7UKH4EZeuIoiY9HPBuBrf17RMmFXJZPr-f2vORmfkby/s1600/speaker+badge.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW_k8tU_bws5vnMPpiaOwk_ZtJfnJeS1r6FZ-8SSyrKIg5YokXm6TvX3PoDs3FzbTC6u_GgvDqb7Owk7I4DhxMKNGmhTQooQ54H7UKH4EZeuIoiY9HPBuBrf17RMmFXJZPr-f2vORmfkby/s320/speaker+badge.JPG" width="240" /></a></div>
<br />Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-17103857537722550662011-12-17T20:59:00.000-08:002011-12-17T06:55:08.641-08:00How to actually get to win-win<br />
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<span style="font-family: 'Trebuchet MS', sans-serif;">Many companies and business development executives talk
about the importance of a “win-win” philosophy in their relationships and
negotiations. They want to be
successful and their partners to be successful in a true synergy. But, what is their road map for getting
to a win-win? Too often, there
isn’t a real methodology behind the talk.
Win-win is in danger before the race even starts.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">Here’s an approach that can be applied to many different
types of business arrangements to try to achieve that holy grail of
win-win. It has worked for me over
many years of negotiating hundreds of deals.</span><br />
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<span style="font-family: 'Trebuchet MS', sans-serif;"><span style="font-size: 9px;"><br /></span></span></div>
<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif;"><span style="font-size: small;">1. <u>S</u></span></span></span><u style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">pend extra time on the economics up front</u><span style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">. Since win-win is supposed to mean that
each company makes more money with the partner than it would without, what
modeling has been done to ensure that this becomes reality? In practice, it is tempting to jump
into papering a transaction before serious financial analysis has truly run its
course. Yet, a dedication to
getting the numbers right will typically pay dividends.</span></div>
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<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;"><br /></span></span><br />
<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;">2</span>. </span><u style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">Respect, rather than take advantage of, your
partner’s largest concerns</u><span style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">.
This is harder than it sounds.
Every negotiation will involve a certain amount of chess and horse-trading.
But, if your partner reveals a
walk away position or two that will be standard in its industry, respecting
that position will instantly deepen the relationship.</span></div>
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<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;"><br /></span></span><br />
<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;">3.</span> </span><u style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">When it comes to the legalese, be prepared to
settle on true neutrality</u><span style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">. The
typical contract will favor the side of a deal that prepared it. There isn’t necessarily anything wrong
with that, as long as both sides understand what true neutrality means and,
assuming the leverage is roughly equal, are willing to settle on it. It means reciprocal representations, indemnifications
and confidentiality provisions.
When two companies are located in different states, it often means
choosing a third state’s law to govern the contract.</span></div>
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<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;"><br /></span></span><br />
<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;">4. </span> </span><u style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">Understand the details</u><span style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">. Is the devil really in the
details? Since execution is about
details, the answer is almost always yes.
Sure, contracts get amended all the time, but the wrong starting point
could kill the relationship before it has time to blossom. Lawyers should understand the business
purpose and the business people should understand the legalese. Everyone needs to read the contract.</span></div>
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<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;"><br /></span></span><br />
<span style="font: normal normal normal 7pt/normal 'Times New Roman'; text-indent: -0.25in;"><span style="font-family: 'Trebuchet MS', sans-serif; font-size: small;">5. </span></span><u style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">Strive for a long-term contract</u><span style="font-family: 'Trebuchet MS', sans-serif; text-indent: -0.25in;">. As much as corporate America talks
about long-term thinking and strategy, there are many forces that make this
challenging. Quarterly earnings
calls for public companies emphasize 90 days of performance. Revenue recognition rules can
essentially encourage short-term deals. It’s difficult to establish win-win in a short time
frame. Aim for a five-year term. Expect, plan for and demand success. Commitment facilitates win-win.</span></div>
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<br /></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-62995443695818797942011-11-12T19:11:00.001-08:002011-11-12T19:48:34.128-08:00Ownership is (still) everything<br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">With open source software being widely popular and <a href="http://en.wikipedia.org/wiki/Lawrence_Lessig">Larry Lessig</a> becoming a household name, is the concept of intellectual property ownership dead?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Absolutely not.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Inventors are still applying for patents as aggressively as ever. Ownership comes up in almost every commercial sales contract, in every M&A transaction and in every IPO. Today we even have <a href="http://www.forbes.com/sites/davidcoursey/2011/11/03/who-owns-your-linkedin-contacts/">companies claiming ownership in LinkedIn contacts</a>.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">This is all because ownership remains a great differentiator. Generally, ownership entitles you not just to engage in some kind of lucrative activity. It also allows you to prevent others from doing it. Companies sue others for patent infringement or negotiate for ownership of software in commercial contracts because millions, potentially billions, of dollars are at stake.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">How should companies react to this reality?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Embrace it. Recognize this value and work to maximize it. Invent, develop and patent using the best engineering talent you can find. Once you have intellectual property, protect, nurture and grow it. Negotiate hard when the topic of intellectual property comes up, because revenue and enterprise value are up for grabs. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">By acknowledging that ownership of intellectual property remains a foundational issue in company valuations, companies set the philosophical groundwork for business practices that will help them win. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com2tag:blogger.com,1999:blog-2732539612429546774.post-23368317076479826612011-10-24T06:57:00.000-07:002011-11-17T07:24:11.071-08:00The death of the simple NDA<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Non-disclosure agreements may never have really been simple, but they do seem to have become more complex in recent years. No doubt part of the reason for this is the increasing sophistication of those writing and managing NDAs. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Whatever the cause, the result is a substantial amount of risk for companies and individuals who dismiss NDAs as mere "boilerplate." It is now as crucial as ever that those doing business with others use NDAs and, when using others' forms, read them carefully.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Here are a few challenging positions I have seen in NDAs that I suggest users approach with caution. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">1. Assignment of intellectual property ownership. An NDA is designed to simply allow two parties to start talking to one another about a deeper relationship. Yet, in a couple cases, I have actually seen an NDA provide for one party's ownership of everything created over the course of the relationship. No proprietary technology company will sign up for this. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">2. Non-competition provisions. Occasionally, NDAs will prevent one party from competing with the other. This is another aggressive position with economic implications far beyond the NDA's typical "Let's talk" premise. Non-competition provisions may also raise anti-trust issues.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">3. No-hire provisions. Some NDAs will prohibit the solicitation of the other party's employees or customers. Others will take the next step of seeking an actual no-hire clause. Either provision will drive how the parties interact with one another.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">4. Lack of an independent development carve-out. Most NDAs provide exceptions for what kind of information is deemed confidential. A crucial exception that is sometimes missing regards independent development. It's important to be able to retain the right to come up with good ideas independently of those that a vendor, customer, reseller or joint venture partner might have.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">5. Inappropriate period of protection. NDAs will typically provide for a confidentiality period of about five years. But, a business providing access to its most sensitive secret sauce that it expects to be valuable for decades would certainly want more protection than that. It's important to think through how an NDA will be used in a given situation before signing up for a certain period of protection.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">6. Venue provisions. Parties will often agree in advance where to litigate a dispute arising out of a contract. But, this choice of location could create leverage for one party over the other. Be thoughtful about agreeing to venue in your business partner's backyard if it's thousands of miles away from where you work. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">7. Inconsistencies with other applicable documents. If some other commercial agreement is signed as a result of the initial discussions, it will be important to consider how it relates to the NDA. A new agreement with its own confidentiality provisions could create confusing conflicts with the NDA. The NDA needs to be either completely superseded or carefully integrated into the new agreement. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-37988644242832037312011-10-03T10:22:00.000-07:002011-10-03T10:22:45.434-07:00Insider PSA: "You're shady and self-dealing"<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Venture investor Chamath Palihapitiya recently wrote a critical e-mail to the founder of Airbnb. Palihapitiya passed on the opportunity to invest in Airbnb's latest financing round. His criticism focused on a controversial and unusual element of the transaction. In a nutshell, a <a href="http://blogs.reuters.com/felix-salmon/2011/10/02/why-dividend-cash-outs-are-evil/">dividend to common stockholders was being used to provide cash to founders to the disadvantage of other employees</a>. The e-mail raised many valid points and some good coaching, including the sentence, "Treat your employees the same as you'd treat yourself."</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">So what's the problem?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The problem is that <a href="http://allthingsd.com/20111001/vcs-unite-chamath-palihapitiya-decries-airbnbs-recent-112m-funding-for-excessive-founder-control-and-cashout-in-email/?mod=tweet">the e-mail was somehow leaked to a reporter</a>. Given the amount of confidential information Palihapitiya was given, this amounted to a credible insider public service announcement that the founder could be considered, as the e-mail put it, "shady and self-dealing." I don't believe that </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Palihapitiya intentionally leaked the e-mail, but </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><a href="http://uncrunched.com/2011/10/01/chamath-palihapitiyas-statement-on-airbnb-email-fiasco/">the disclosure was embarrassing to all involved</a>.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">It's also symptomatic of a couple challenges in Silicon Valley's business culture. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">We have become too reliant on e-mail to communicate in detail about sensitive topics. Coaching and constructive criticism are valuable, but e-mail is often an unhelpful channel for it. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In addition, Silicon Valley is sometimes <i>too</i> open. We have open office spaces. Many investors refuse to sign non-disclosure agreements. Some companies sign NDAs without reading or thinking about them - a very risky practice given that I have actually seen proposed "NDAs" in the last few years that assigned all intellectual property created in the business relationship to one party. </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Every thought is posted on Twitter. The "confidential" footnote is not inserted in the first place or ignored.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">It's a good time to revisit the value of 1:1 verbal communication and confidentiality. Not everything is meant for public dissemination.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">If Palihapitiya's email "really was just an attempt to give (the founder of Airbnb) private feedback," he should have picked up the phone.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-15560386396093020442011-09-19T07:09:00.000-07:002011-09-19T07:09:12.798-07:00Customer Loyalty Chronicles, Vol. I – Roland<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Hugely successful companies often boast about their "secret sauce." They will cite particular ways they manage or recruit their people, their unique methods of quality control or their brilliant Super Bowl advertisements. Successful companies surely have a secret sauce and the greatest companies rise above with long term customer loyalty. </span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">When customers love the product so much that they are passionate about the company, that is an irreplaceable asset. Apple sets the bar for its ability to generate long term customer loyalty. But, there are other companies that have secured long term customer loyalty.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><a href="http://www.rolandus.com/">Roland Corporation</a> is a company that I feel doesn't get near the attention it deserves for its success in this realm. The Japanese manufacturer of electronic musical instruments has been a market leader for over 35 years, supplies major artists as well as amateurs worldwide and has developed the most devoted following in the industry. In studying Roland, I have observed three elements that have driven its long term customer loyalty.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b>Innovation</b>. Roland is obsessively innovative, in ways that might even lead some to at first question it. Apple is widely revered for being able to create demand with supply. When the iPod came out, many said, "Why do we need this exactly?" Today, everyone has one. Same for Roland's electronic drums. An oddity at first, today they are common because of their flexibility and reliability.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b>Passion</b>. An extraordinarily driven and passionate founder seems to make a world of difference when it comes to customer focus. Roland's was Ikutaro Kakehashi, who was orphaned at age two, spent four years of his early life in a hospital with a protracted illness and started his career as a watch repairman. The love Mr. Kakehashi has for music and the desire he has to build the best musical instruments in the world is clear in his products and in his <a href="http://www.amazon.com/Believe-Music-Hardcover-Ikutaro-Kakehashi/dp/0634037838/ref=sr_1_1?ie=UTF8&qid=1316128362&sr=8-1">moving personal memoir</a>. If you're interested in an off the beaten path business book, I highly recommend it. It's as if Mr. Kakehashi is still obsessed with making sure each and every customer who comes by his little store is delighted with his work. </span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b>Freshness</b>. Roland is able to stay fresh with long time customers and gain new ones by keeping up with emerging trends in music recording and performance. Among the ways it does this is through promotion of its relationships with young stars, such as <a href="http://www.rolandus.com/community/insider/article.php?ArticleId=1168">Lady Gaga</a>. Decades after starting his company, Mr. Kakehashi remains a dreamer, writing in his book that Roland is looking at "turning imagination into sounds, images, and even shapes, then combining them to produce new solutions."</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Long term customer loyalty is a key element of corporate success. Companies that are able to get there, like Roland Corporation, are great guides to achieving it.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-89458561825280256132011-09-01T20:06:00.000-07:002011-09-01T20:06:44.374-07:00America’s Trickiest Laws, Vol. II – Contractor-Employee Classification<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The use of contingent workers has become a key component of many companies' human capital management. Independent contractors minimize headcount, maximize flexibility and often allow a company to use more specialists than its size would ordinarily permit.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">But, the era of contingent staffing has created a tricky challenge. Federal and state governments have taken a strong interest in the classification of workers as contractors versus employees. In a nutshell, a contractor classification costs the government revenue. And the misclassification of employees as contractors has reportedly cost the government billions of dollars.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Unfortunately for business, getting the classification right is no easy task. The <a href="http://www.twc.state.tx.us/news/efte/appx_d_irs_ic_test.html">11 factor test of the IRS</a> is helpful but it is neither clear cut nor weighted. On top of this, the <a href="http://www.mboenterprise.com/blog/and-you-thought-irs-was-strict-about-ic-misclassification-get-ready-statespart-2-2">states have different, fluid standards of their own</a>. The costs of getting it wrong are significant, from fines to the possibility of personal criminal liability for company officers.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The good news is that as attention to classification issues increases, so have the resources for helping to address the challenges. Experienced commentators have taken a renewed interest in the topic, publishing <a href="http://www.accdigitaldocket.com/accdocket/201104?pg=45#article_id=63900">useful guides to dealing with contractor management</a>. Third party vendors have emerged that will provide objective contractor testing and employer of record services to insulate companies from many of the risks of using contractors. One that I have personally used with great satisfaction is MBO Enterprise Solutions, which recently published a <a href="http://www.mboenterprise.com/case-studies/levi-strauss">case study on its success at Levi Strauss</a>.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Contingent staff have become a critical tool in achieving big goals in corporate America. Being aware of the challenges that come with contractor classification is important to running a successful workforce solution. </span><br />
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Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com1tag:blogger.com,1999:blog-2732539612429546774.post-23676766112667379602011-08-26T08:36:00.000-07:002011-08-26T08:37:24.085-07:00Googlerola emphasizes importance of strong patent portfolios<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Google's $12.5 billion bid for Motorola Mobility, at a 63% premium, is generally thought to be about using Motorola's large patent portfolio to help protect Android and Google's other mobile communications interests. <a href="http://www.economist.com/node/21526370">The deal has renewed debate on the weaknesses of our patent system</a> and generated <a href="http://www.bloomberg.com/video/73986800/">some interesting discussion about Google's plans</a>. It also emphasizes the reality that today, meaningful patent portfolios are still critical to business.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">One would think that Google would have developed a much larger portfolio of its own. The company has generally had a long term view, is indeed very innovative and has plenty of talented engineers, product managers and lawyers to write patent applications. The reality, however, is that creating in-house patent development programs is challenging. There are many reasons for this but a primary issue is simple - since time spent on patents doesn't necessarily turn into extra revenue until years later, patent work can be hard for young companies to prioritize.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">So how does a company start a serious patent program that increases its valuation? There are a few simple steps most any company can take.</span><br />
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</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">All company stakeholders need to recognize the value of intellectual property and regularly review metrics. Examples of such metrics include number of applications filed per quarter and competitor comparisons. Patents are probably the most objective measure of technological innovation, and yet often take a back seat at many board meetings to a deep dive on short term financials and sales data. Management, board members and shareholders of technology companies, having seen the valuation premium paid for Motorola's portfolio, should all expect measurable productivity from their teams in this regard.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In addition, have one point person ultimately responsible for developing a patent strategy. Whether this person is the company's Chief Technology Officer, VP Marketing, General Counsel or has some other role such as a VP of Intellectual Property, having one owner is much more likely to create accountability, clear goals and success. Committees can be helpful, but identifying a leader will help tremendously.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Finally, create company-wide incentives for, and recognition of, inventors. Simple incentives such as cash bonuses are a sure way to increase productivity in patent programs. Give, as an example, $1,500 per named inventor for granted patents and watch the number of patent applications increase rapidly. I also like awarding plaques and certificates to inventors as recognition for their innovation.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">These building blocks can help you establish your own successful patent program. And developing a deep patent portfolio can help a technology company create significant enterprise value while protecting core assets. </span><br />
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</span>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-34912491583785582942011-08-18T20:35:00.000-07:002011-09-01T20:03:14.277-07:00America’s Trickiest Laws, Vol. I – The Foreign Corrupt Practices Act.<div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Our nation may be one of laws, but our laws don’t necessarily make compliance easy. In this series, I will try to highlight “tricky” laws, or those that corporations and professionals often find confusing, inconsistently enforced or impractical given various business conditions. In my view, these laws deserve extra attention from corporate <st1:country-region w:st="on"><st1:place w:st="on">America</st1:place></st1:country-region> because they often create great uncertainty.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The Foreign Corrupt Practices Act (FCPA) is an increasingly prominent example, as the Department of Justice has been both aggressive and successful in prosecuting FCPA cases of late, including <a href="http://www.mofo.com/files/Uploads/Images/110809-FCPA-Prosecution-Individuals.pdf">another win earlier this month in the ongoing Haiti Teleco scheme</a>. </span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">On the surface, the FCPA seems pretty basic. It has an anti-bribery provision that prohibits corruptly paying or offering to pay anything of value to a foreign official to secure an improper advantage or influence him in his official capacity.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Where the FCPA gets tricky is in five different practical areas. </span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">First, local custom is less important than compliance with law. The rallying cry that, “We must pay bribes in country X because others do” is not a defense. In reality, it’s an FCPA violation waiting to happen.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Second, and occasionally at odds with the first, the FCPA has exceptions that some commentators believe are not really exceptions at all. Grease payments made to expedite or secure routine government action are permitted. Wait, what? Some bribes are OK if we call them “facilitating payments”?</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Third, FCPA involves “successor liability,” meaning that a company is liable for the FCPA violations of the other companies that it has acquired. Mergers and acquisitions activity is complicated enough. With the FCPA, compliant, ethical companies have an additional risk to address – what is the FCPA profile of the target company?</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Fourth, the FCPA includes a record keeping provision, requiring careful accounting of all transactions. This includes records relating to facilitating payments. So, if the company’s judgment about whether those payments were compliant proves incorrect, the documentation of the violation will be in black and white.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Fifth, most companies probably do not have adequate full time staff proactively managing FCPA compliance. While significant SEC filing requirements (e.g., 10-Ks, proxies) lead corporate legal and finance departments to staff up to regularly prepare these documents, there is no tidy equivalent in the FCPA world.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">When doing business internationally, keep an eye on the FCPA. It’s one of our “tricky” laws.</span></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-33564527963993275632011-08-11T20:16:00.000-07:002011-08-11T20:16:24.115-07:00Facebook didn’t steal your stuff. And don’t click “agree” next time.<div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Worries over Facebook’s privacy policies continue. Upon closer examination, the concerns are more broad than Facebook’s specific policies.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The <a href="http://techcrunch.com/2011/08/10/in-the-book/">latest episode</a> involves a fairly straightforward practice. Using the Facebook mobile apps will sync your friends’ contact information between Facebook and your phone. Only you can see it and you clicked “I agree” in setting up the connection between Facebook and your phone. But, this alarmed some users when it was “reported.” </span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">General web usage habits are implicated by this concern. How many times do we speed through a web-site, clicking “I Agree” multiple times without reading the fine print? Too often. Even if Facebook wanted to eat our first born, many would sign right up for it and click “I Agree. You can have the second one too.”</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Some of Mark Zuckerberg’s past cavalier statements about privacy certainly haven’t helped, such as when <a href="http://old.news.yahoo.com/s/ytech_gadg/20100524/tc_ytech_gadg/ytech_gadg_tc2204">he reportedly expressed surprise early on that people would so willingly share personal information</a>. “People just submitted it. I don’t know why. They ‘trust me.’ Dumb [expletive].”</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">But, more than anything, I think folks are reacting to broad concerns over the increasingly public lives we live through our Internet identities. We subconsciously recognize that we are not reading the license agreements and don’t fully understand the privacy policies. We hear about people sharing too much in their news feeds. I don’t believe any of those issues are ultimately Facebook’s fault.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Perhaps it’s time to consider this kind of privacy policy first and foremost…</span></div><div class="MsoNormal"><br />
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</div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-83192195843395306972011-08-05T07:16:00.000-07:002011-08-10T13:53:12.128-07:00Thank goodness for volunteerism.<div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">I spent much of last week as a volunteer scorekeeper at the Bank of the West Classic, a professional tennis tournament held every summer at </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><st1:place w:st="on"><st1:placename w:st="on">Stanford</st1:placename> <st1:placetype w:st="on">University</st1:placetype></st1:place></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">. I was one of about two hundred unpaid tennis lovers who acted as ushers, sold programs, directed fans around the grounds and, as in my case, logged extensive data on each ball struck by the players. Add to that hundreds of ball kids who were also volunteering. It was great fun and I had the privilege of meeting several of the players, including </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><a href="http://www.wtatennis.com/player/maria-kirilenko_2257889_9891">Maria Kirilenko</a></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> (career high singles ranking of 18).</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaQJrdZ3kPqvykI9BUcJeM5a3N8tcS6w1WWlpHFX8JszfyyBSdXkbuKtZGvhDum1L-jI-pLkIZYSN-nkMLiWoxq-5Yispya29ik3ZPDyUhAkjP2zz3IwUD1UswSBwxasHTmJCSw7bEOeW8/s720/DSC_2366.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaQJrdZ3kPqvykI9BUcJeM5a3N8tcS6w1WWlpHFX8JszfyyBSdXkbuKtZGvhDum1L-jI-pLkIZYSN-nkMLiWoxq-5Yispya29ik3ZPDyUhAkjP2zz3IwUD1UswSBwxasHTmJCSw7bEOeW8/s320/DSC_2366.JPG" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Meeting Maria Kirilenko at Stanford.</td></tr>
</tbody></table><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Among the many parts of this experience that fascinated me was how many of the volunteers had a deep knowledge of players who are hardly household names.</span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">As I watched <a href="https://twitter.com/#!/sharon_fichman">Sharon Fichman</a></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">, I understood why.</span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Like the volunteers, she toils in anonymity, rewarded mainly by her own love of the game.</span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">She practiced hard, played hard and gave it everything – but failed to qualify for the main draw in singles.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnTqCEkBxn1dQZQzfHsjW6Y-xCfKU_xW2pZC4joAi7FhTg-6B5zxwbU-uG2RTh5MW0vlX77_yJgP9Qpkqf6meJ6wca-_WUyrLSl2ivJecRCXjPAvu_3lGAf9jaqBnuQvaDBHaUFQHS6oP3/s512/DSC_1757.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnTqCEkBxn1dQZQzfHsjW6Y-xCfKU_xW2pZC4joAi7FhTg-6B5zxwbU-uG2RTh5MW0vlX77_yJgP9Qpkqf6meJ6wca-_WUyrLSl2ivJecRCXjPAvu_3lGAf9jaqBnuQvaDBHaUFQHS6oP3/s320/DSC_1757.JPG" width="228" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Sharon Fichman brought her spirited game and 289 Twitter followers (Serena Williams has over 2.1 million) to Stanford.</td></tr>
</tbody></table></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">More important than the tennis was the reminder that volunteerism is the backbone of many American systems we sometimes take for granted. VolunteeringinAmerica.gov estimates that there are over 60 million volunteers per year in <st1:country-region w:st="on"><st1:place w:st="on">America</st1:place></st1:country-region>. Underfunded schools rely on parent volunteers. Volunteers staff soup kitchens, homeless shelters and YMCA tutoring programs. Our entire system of democracy counts on volunteers at the voting stations!</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The whole experience made me thankful that there are so many opportunities to get involved and so many passionate people who do just that.</span></div><div class="MsoNormal"><div class="separator" style="clear: both; text-align: center;"></div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
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</span></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com2tag:blogger.com,1999:blog-2732539612429546774.post-82718085915115086642011-07-28T15:33:00.000-07:002011-07-28T15:33:59.764-07:00Difficulty closing the deal? Get a room.<div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">No, not that kind of room.</span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">This blog is intended to be interesting.</span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">But not that interesting.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In my experience, the best way to get a challenging transaction signed is to gather all of the key decision makers on both sides in a conference room, laptops and blue pens in hand, but away from either party’s offices. This group’s sole task is to close out all of the hard issues and actually sign the contract. Both parties need to commit to this course of action in advance, allocating enough time to work through every open item. </span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">There are several reasons that this approach tends to work.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">First, “getting a room” forces prioritization. If your organization is typical, you’re trying to do many things well. Everything is a high priority. Inevitably, this results in the more complex transaction not getting the consistent attention it needs to close. The stops and starts are inefficient and often cause the deal to get bogged down unnecessarily. Getting everyone together for as long as it takes ensures that the transaction gets the focus it deserves.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Second, using the conference room approach smokes out misalignment quickly, even within a negotiating team. On each side of the negotiation there will be a divergence of skills. This leads to divergence of opinion and behavior. The lawyers will seem ready and willing to fight over minutiae and trade detailed redlines for months. Meanwhile, one company’s CEO and VP of Sales may not have the same vision for a particular transaction. It may not be clear who owns what issue, even on the same side of the table. Sub-teams may have been created that drill into certain issues in a vacuum. Getting everyone together encourages alignment by requiring each side to react and make decisions promptly in a coordinated manner. <a href="https://twitter.com/#!/msuster">Venture capitalist Mark Suster</a> has written on a similar notion, which he calls <a href="http://www.bothsidesofthetable.com/2011/07/19/dont-cede-control-why-you-need-to-cut-out-middle-men-in-negotiations/">“cutting out the middle man.”</a> </span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Third, this method encourages compromise, which is probably the single most significant requirement for the agreement to get signed and for the long term business relationship to succeed. By committing to signature ahead of time, posturing becomes more difficult. Teams are under pressure to compromise because leaving the conference sessions without signature will be considered a failure. Usually, being face to face makes the discussion more cordial and friendly. Developing that spirit of cooperation is much easier as you share meals and spend more time together.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Finally, gathering the key folks together in one place instantly cuts through bureaucratic systems that would otherwise cause tremendous delay. Every company has systems and public companies will typically have strong internal controls. Even when those responsible for these systems are communicative and aligned, getting through the line takes time. Companies willing to close transactions in a conference room also have systems in place to streamline red tape when senior management requires it. Whether that means sending a representative from the purchasing department or a revenue recognition specialist to the meeting, making clear to everyone that a contract is about to be signed can suddenly end the series of waiting games.</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Try or revisit the all hands conference room approach. In most situations, it will quickly pay meaningful dividends.</span></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com0tag:blogger.com,1999:blog-2732539612429546774.post-74054945296624213742011-07-19T20:51:00.000-07:002011-07-19T23:19:28.815-07:00"Please just tell me I'm great."<div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><i>This post was co-authored with human resources guru <a href="http://www.linkedin.com/in/lisayoungdahl">Lisa Youngdahl, SPHR, HCS</a>.</i></span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><a href="http://www.theatlantic.com/magazine/archive/2011/07/how-to-land-your-kid-in-therapy/8555/1/">The <st1:place w:st="on">Atlantic</st1:place> recently published an interesting piece</a> by psychotherapist Lori Gottlieb. In it, she contends that the cult of self-esteem is dooming our kids to unhappy adulthoods. The idea is that as parents we are trying so hard to make our kids feel happy and seem successful, regardless of the reality around them, that we are not preparing them for life’s ups and downs. The <st1:place w:st="on">Atlantic</st1:place>’s cover art summarizes the idea perfectly – a trophy adorned with a soccer player completely missing a kick with the tag “good try.”<o:p></o:p></span><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_NuLd_9HkDfLzJ1kP_FEyKJ7HVqIquxZKTGSdyrdfqhgtVBpkIFSA2ztM4VQKyfEVwp7rnB-vo_eUa87qj_sPQPuMKIMxAP-Xy9ejoQwsYyplyz72IcbA2HHlrH7CRXpsEBci2qUUhoSi/s1600/atlantic+cover.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_NuLd_9HkDfLzJ1kP_FEyKJ7HVqIquxZKTGSdyrdfqhgtVBpkIFSA2ztM4VQKyfEVwp7rnB-vo_eUa87qj_sPQPuMKIMxAP-Xy9ejoQwsYyplyz72IcbA2HHlrH7CRXpsEBci2qUUhoSi/s320/atlantic+cover.jpg" width="240" /></a></div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
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</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">This trend has been going on in corporate <st1:country-region w:st="on"><st1:place w:st="on">America</st1:place></st1:country-region> as well. Employees are sometimes so sensitive about feedback that we either sugar coat or just hold back key data to avoid hurting feelings. The worry is that the employee might leave at an inconvenient time (“I must get this next release over the finish line before I talk to Sally”). The informal office network is powerful and we wouldn't want to harm morale.<o:p></o:p></span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Management doesn’t necessarily fare any better. The dying art of the exit interview is the proof in the pudding. Companies will often throw out softball questions and lap up the pleasant answers from departing employees who don’t want to burn any bridges. “I loved it here but just got a surprise opportunity that I didn’t feel I could pass up.” Yawn.<o:p></o:p></span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">It’s almost as if we all want to be lied to for the sake of keeping a smile on every face. “Please just tell me I’m great.” <o:p></o:p></span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br />
</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">How do we solve for this? Valuable resources include <a href="http://www.amazon.com/Coaching-Improved-Work-Performance-Revised/dp/0071352937">Fournies' Coaching for Improved Work Performance</a> and <a href="http://www.amazon.com/Crucial-Confrontations-Resolving-promises-expectations/dp/0071446524/ref=sr_1_1?s=books&ie=UTF8&qid=1311133152&sr=1-1">Patterson's Crucial Confrontations: Tools for Resolving Broken Promises, Violated Expectations and Bad Behavior</a>.</span><br />
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</span></div><div class="MsoNormal"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Some refreshing honesty and self-awareness every once in a while probably wouldn’t hurt. Take some time to be frank with yourself about strengths and weaknesses. Strengthen your company’s exit interview process so that you’re asking hard, probing questions and reporting the blunt answers anonymously to management. Tell a subordinate what they could have done better on the last assignment. It doesn’t have to be cruel, rude or loud, but direct communication is ultimately…well, great therapy.</span><o:p></o:p></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com1tag:blogger.com,1999:blog-2732539612429546774.post-49581873157162032012011-07-14T15:32:00.000-07:002011-07-14T16:02:07.326-07:00"Top talent" not reading their own comp agreements<span class="Apple-style-span" style="color: #333333;"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">The controversial stock option arrangements at Skype have been receiving a great deal of attention in connection with the company's sale to Microsoft.</span></span></span><br />
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</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">Detailed pieces have been written at <a href="http://techcrunch.com/2011/06/26/skypes-worthless-employee-stock-option-plan-heres-why-they-did-it/">TechCrunch</a>, <a href="http://www.businessweek.com/magazine/content/11_27/b4235038625596.htm">Bloomberg</a>, <a href="http://finance.fortune.cnn.com/2011/06/24/skype-vesting_controversy/">CNN</a> and <a href="http://blogs.reuters.com/felix-salmon/2011/06/24/upgrading-skype-and-silver-lake-to-evil/">Reuters</a>.</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">The central twist of the Skype stock option arrangement is simple. The company had the right to repurchase VESTED stock options from departing employees at the same price that the employees paid. This means that departing employees, even if in the money on vested stock options, could walk away with nothing.</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">These provisions are unusual for most groups of employees. There were other elements around the acquisition that were controversial, including several involuntary terminations. The stock option treatment has been called everything from evil to likely fraudulent. Whether one believes that these kinds of provisions are fair, there is little doubt that most prospective employees would look much less favorably at joining a company where such an arrangement exists. It could be made up with higher salaries, but there should be a market penalty.</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">But, what is most interesting to me in the conversation is that most of the commentary acknowledges that the Skype arrangement was disclosed ahead of time. The problem was that apparently the "top talent" at Skype didn't carefully read the legalese or consult a lawyer. That's unfortunate.</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">"Employees had no idea what they were signing," according to TechCrunch. According to Bloomberg, a <a href="http://framethink.wordpress.com/2011/06/24/how-employees-get-screwed-in-private-equity-deals/">product management employee at Skype whose blog entry</a> triggered much of the attention "never bothered to read" a critical document relating to the stock option arrangement.</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">This is a remarkably clumsy habit that still seems to affect tech veterans in Silicon Valley. How can these smart, accomplished business people simply ignore the specific elements of their own compensation arrangements? How can they be counted on to serve their employers' interests in building the next great category winner if they aren't diligent enough to even protect their own interests? </span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br />
</span></span></div><div><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">Sure enough, that product management employee at least is now singing a simple tune. In his blog he advises, "LAWYER UP </span><span style="color: black; line-height: 22px;">—</span><span style="color: black;"> it'll be worth your while to get an attorney to carefully review all employment documents so that you know what you're really getting into."</span></span></div>Lonnie Goldmanhttp://www.blogger.com/profile/04857483473301765627noreply@blogger.com2