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Entrepreneurship

Coffee in Breakfast Cereal – A Bad Mix

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Ah yes, the sweet smell of summer on the Charles River… July 13th.  I see that I was starting to develop product specifications and put together a plan to start development.   In fact, I’d already started talking to outsourcing firms to do the development (this would later turn into a mistake ).  Moreover, I was actually starting to draft patent claims around a product may that may well never see the light of day, at least in the form envisioned at that time. 

Moreover, envisioning the regulatory hurdles that we would likely face, I had hired some lawyers to help define this new business in regulatory terms.  They did so but, I felt that they were groping in the dark almost as much as we were.  I then tried repeatedly to contact a former lawyer for PayPal, thinking that she’d have a better idea of the legal landscape; despite numerous tries, that relationship didn’t work. 

We were also spending a lot of our own time, Alison and I, trying to understand the regulatory landscape for this business.   

Then, off we went to visit a number of big banks asking if they’d help us with back-office operations; nice people, really nice buildings and great pastries but, no takers…

Lastly, I was starting to look into raising equity capital from a firm founded by PayPal founders; no luck there either…

Lessons Learned

  1. Start-ups and 3rd party offshore developers are probably a bad mix, kind of like replacing milk with coffee in your breakfast cereal. Start-up products and business models change too fast for a remote site to keep track (it’s hard enough when they are in the same building!) so, by the time something is built, it’s 4 business models behind.
  2. It’s never too soon to start specifying your product. If you can’t find a customer, go find a great sales guy and ask him/her if she thinks she can sell it – then pay careful attention to the answer.
  3. Apply the same rules to hiring lawyers as you would in hiring a key staff member. First, hire someone you know and trust, failing that, hire a lawyer recommended by someone that you know and trust.
  4. Apply rule 3 above to venture capital firms.
  5. Don’t assume that just because you are a potential buyers of services that large institutions will want to help you.
  6. Beware of spending a lot of money on patenting too soon.  While I admit that the strangest claims can seemingly come out of nowhere to be central in litigation, be careful to limit spending on dependent claims – which are claims that depend on the main claims.  Dependent claims are typically refinements and it’s hard to refine when you are still in coarse-tuning mode.           
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Written by Devon

December 17, 2008 at 3:27 am

Posted in Uncategorized

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