Taking funds from a strategic investor
Granting exclusivity to a reseller, OEM or distributor
Board membership and roles
License agreement terms
Expanding outside of the US
Taking funds from a strategic investor
Your startup has gotten some traction and you’ve attracted the attention of some of the big players in your space. So much so that they’ve approached you about potentially investing in the company. While you’re flattered, you will need to carefully consider the pros and cons of taking money from a strategic investor as their investment may come with more strings attached than you and your company may like.
Granting exclusivity to a reseller, OEM or distributor
Granting important customers, distributors, resellers or other third parties exclusive rights to pricing, products, channels, etc. is not uncommon, but these arrangements must be entered into cautiously. By giving a third party exclusive rights to something, you are agreeing not to give that same thing to anyone else. As a result, you are foregoing other potential opportunities and you should be convinced that the benefits of the exclusive arrangement outweigh those lost opportunity costs.
Board membership and roles
A board of directors has the ultimate authority to direct the management of the business and affairs of the company. Legally, the board will authorize the issuance of stock, hire (and fire) senior executives, approve compensation arrangements, including the issuance of stock options, and authorize the company to enter into significant agreements. The board will also be asked to provide advice and approve strategic and operating plans, adopt company budgets and oversee the company’s audit and financial statement functions. Most importantly though, the board’s most critical function is to help management navigate the myriad critical business decisions that will determine the ultimate success or failure of the company. In the initial startup stage, a board of directors might consist solely of one or more founders. However, finding an additional board member with insight and experience that no founder has, but who knows the company’s market or technology particularly well, can be particularly helpful in building the business. In addition, the right director can provide some independent validation that a company’s business has promise. Once a company raises capital, particularly from venture capital funds, board seats will be a negotiated part of the transaction, with a board of directors typically consisting of a combination of founders, investors and independent directors.
License agreement terms
License agreements come in many different shapes and sizes, depending on the nature of the licensed technology and the terms of the business arrangement underlying the license. The following are some of the key terms included in most licenses, though there are many more details negotiated in each license agreement and each such agreement is unique:
Expanding outside of the US
There are many ways to expand internationally. Successfully building a startup often means that global aspirations need to be built into the initial launch and marketing effort of a new business or product. Most startups are keenly aware that going global is not only good for business but often the only viable way to build a successful company. However, international expansion can have its own pitfalls—resources and cash are often strained and taking your eyes off the ball within the home market may lead to trying too much with too little, thereby diluting all efforts, and potentially leading to ultimate failure of the business.
