Laying down the law on startups

Amid the crackling of lunch bags and sandwich plastic, Monday's second E-week event, Legal Tips for Startups in Today's Economy, kicked off at the Stanford Law School to a packed audience. Hosted by the Stanford Law and Technology Association, the event--billed as a panel discussion and brown bag lunch--featured four speakers from the Emerging Companies Group at global law firm Orrick, Herrington & Sutcliffe LLP.

Harold Yu '93, a former undergraduate at the university who graduated with a degree in computer science, moderated the discussion, which ranged from examinations of intellectual property rights to explanations on the incorporation process.

As the crowd trickled in, Greg Heibel broke the ice by making it clear that the legal panel was not to be confused with a concurrent E-week event, The Power of Social Technology.

"If any of you are expecting Hammer, this is not the right room," he cracked in a reference to the other event's more notable speaker, MC Hammer.

Yu began the talk by examining the process by which startups were put together. Presenting situations and questions to the other panelists, he began a dialogue that asserted the importance of sorting out intellectual property rights from a company's outset.

While Heibel emphasized that starting a corporation was "very easy," he advised that entrepreneurs set clear agreements regarding equity and later compensation. Sort out compensation matters when "everyone is still happy," he said, comparing the discussion with his firm and companies as the "closet thing that Orrick comes to practicing matrimonial law."

Stephanie Sharron, a partner who specializes in business transactions, added to Heibel's statements by discussing the importance for individuals to know who they were working with.

"When you're first putting together a company, emphasize how important the team is," she said. "Focus on your idea and who your team members will be... When looking strategically at the company, put into place things relating to [intellectual property], the share of company and so forth that will allow you to add members."

Heibel also provided some more immediate advice for startups.

"Please, don't incorporate in California," he said to a round of laughter, alluding to the state's unfavorable tax policies.

As the discussion opened up to questions, audience members began to direct dialogue toward the problems that the current economy posed to startup ventures. Partner Richard Smith stated that while the recession was "thawing," he still felt that "resources for startup companies are still scarce." Smith later suggested that, in today's market, risks were inevitable and skimping in certain areas were all but unavoidable given the lack of financial backing to companies.

"Businesses are not risk-free," said Smith. "The last thing you want to do is promise a guarantee."

Entrepreneurship Week at Stanford will continue until Sunday, Feb. 28. For more information visit http://eweek.stanford.edu/.