This past Friday, Ian Stock of EntrepreLaw came into speak at the Project for Innovation and Entrepreneurship about his experiences and provided insight to our young entrepreneurs about startups. He started off by describing the winding and interesting road to founding his own Law office. His credentials are amazing but his journey is more so; Ian went from corporate lawyer at Wilson Sonsini to an entrepreneur who is devoted to helping his community and local start ups. His talk focused on three main points:
Ian describes his career path to the students at the Project for Entrepreneurship
It has to be more than just an idea, then maintain control.
Ian discussed the boom of the dot-com bubble and the roles that VC’s played then and now. He recalled the days when an idea was all you needed to secure funding – and the lavish lifestyle that accompanied it. But now an idea is not enough. Entrepreneurs must now show that they can actually make money before a VC will fund them. His advice then when you start to make money: if you must go to a VC maintain as much control as you can.
Ian discusses the role of options in a startup
Funding: Aim for a mix between angel investing and convertible debt
One to secure funding is by asking an angel investor (mom or pop) to invest in convertible debt. An investment may not be a significant dollar amount at the beginning, but startups must provide an upside to investors. Convertible debt allows an investment to be converted into equity when the company is valued.
Ian fields questions from students
Options – Not an option
Finally, Ian discussed the role that options play in startups. Options allow companies to conserve cash and provide an upside to contractors or employees for their work. Ian went into some detail about how options work and discussed their benefit from a startup perspective, but also cautioned those who take them to make sure they are a good deal.
In the end, students got a good picture of how the funding system works in Silicon Valley. They learned about options and equity, but also learned that in today’s world, we can’t always depend on a company to provide us security. The best way to have security in today’s world is to work hard and to work smart.
