The startup and the money, according to David Sorin

By Dennis Clemente

If you were to choose between going to a show-and-tell demonstration or going to a legal talk on equity and term sheets, we won’t be surprised if you choose the former. But if you know what’s best for you and you want your startup funded and protected, then you’ll want to listen to David Sorin, the head of the Venture Capital and Early Stage and Emerging Companies practice at McCarter & English.

At the Brooklyn Tech meetup held at the law firm’s office on midtown Park Avenue last November 12, Sorin talked in his lively and engaging way about his role being on both sides of the entrepreneur and the money.

“We probably represent more companies than the money, because I think it’s more fun to represent entrepreneurs. But I also think it’s important to represent the investors, so I can understand the deals. It’s helpful to our investor-clients that we represent lots of companies,” he explained.

Sorin spoke clearly and concisely about the legal matters pertaining to early stage capital concerns, terms and conditions of equity rounds.

If you’re looking for a lawyer who likes spelling things out, Sorin does it very well. “What is valuation? The value of the company money before the investment made by the investors. That’s premoney + new money = post money,” he said.

“Entrepreneurs always invariably think their idea is worth more than it really is in the marketplace and so it’s really important to manage expectations,” he said.

Sorin pummels this thought for everyone to get it loud and clear. “Until you can implement and you can prove your concept a) works b) there’s a market for it and c) you can do it on profitable basis, you have to think about what your startup is really worth.”

David Sorin
David Sorin

Sorin believes that even if you just have only have an idea in your head, you have to think of all the legal and financial or fundraising aspects of your startup. He is also a certified public account.

Why? Because you’ll have to think about the longevity or future prospects of your startup. “It’s really bad if you go to your next round and you get a lower valuation. You may not need a second round depending on how capital-intensive your idea is, but chances are you will need that additional round to make you cash-flow positive and profitable.”

On dividends, he had this to say: “You’re not paying dividends. Every dime you get will be used to build the company.

“But your preferred investor will build into the transaction a dividends obligation that will accumulate every year. So once there’s an exit of some sort, the investor is due back what they invested plus the accumulated dividend.”

Sorin also tackled liquidation preference, board composition and other areas of negotiation between entrepreneurs and investors such as anti-dilution and redemption rights, the control of the company through voting and protective provisions, as well as the vesting of founders’ stock.

How can your board composition or selection affect you? If you own 60 percent of your company but there are five other board members, you only have one vote. They are five. It’s definitely something to think about.

In terms of sourcing capital, he agrees with the usual route—friends and family first; accelerators; government grants and programs; early stage venture funds; and even angel investors “who have fewer restrictions and conditions.” They run the gamut of high net-worth individuals who know your industry, and those who are professional investors.

Thinking of the future, he says your choice of an angel investor now may be in conflict later with an investor’s portfolio.

What can you do on Day 1 of your startup idea, even before you have product out there? “Start a cap table (but not a years-long plan). Create an equity investment plan. Get an accountant.” And even if investors tell you there’s no way to protect your business through intellectual property, Sorin thinks otherwise. “There’s licensing, contracts, trade secrets.”

Smart tech in Kinsa thermometer, Augmate eyewear, Drop baking, Birdi monitor

Kinsa
Kinsa

By Dennis Clemente

The most common medical device, the thermometer, just got smarter, thanks to Kinsa. The FDA-approved smart thermometer can track temperatures and symptoms all right, but it does that by connecting its nifty wand to a smartphone’s earphone jack where–having downloaded the app– one can determine temperatures and symptoms. Over time, it hopes to gather better data and work with the public health sector in determining where illnesses are spreading.

Available now in some US retails stores such as CVS, the FDA-approved smart thermometer is the brainchild of Inder Singh, the former executive vice president of the Clinton Health Access Initiative. Singh was at the Hardwired NYC meetup last November 11 at Digital along with three other presenters.

Clearly, Kinsa has thought of everything in its water-resistant wand and app. When it’s plugged in on a smartphone, a visual display of bubbles pop out for kids to enjoy the process of getting their temperatures checked.

Singh provided some tips and takeaways for those looking into retail:
• Go international early to get pre-payment + marketing support
• Go to Apple first and tell everyone Apple has stocked it
• Test in the “fake stores” some retailers have
• Rule of thumb: Wholesale price should be at least 4x your COGs, ideally six times,
especially if you have significant customer support costs
• Start packaging early. This is hard to get right. Retailer want to see your product upfront
• Get merchandising equation instead of going big fast
• Selling in is easy for very novel products.

The other presenter of the night was Pete Wassell of Augmate which has found effective applications for smart eyewear in enterprise, especially in agriculture, automotive, aviation, construction, manufacturing, medical and pharmaceutical. Think bar code scanning, medical operations, professional care for animals. And yes, its platform works with wearables like Google Glass.

Ben Harris, founder and CEO of Adaptics and Mark Belinsky, founder and CEO of Birdi also presented their startups. Adaptics is the maker of the Drop, an iPad-connected kitchen scale for baking while Birdi is a smart air monitor. It monitors the air quality of your home, tracking dust, soot and other health dangers plus warns you about emergencies.

Drop Kitchen – Connected Scale and Recipe App from Get Drop on Vimeo.

With Drop, you can be a baker right away with its app and Bluetooth scale. How does it work? If you need to bake anything, put a bowl on top of a Bluetooth scale with its heat-resistant silicon top and use it to gauge and see your progress in the iPad app, as it gives you visual cues if you’re using the right recipe or amount of ingredients.
Tim Chang, partner at Mayfield Fund, spoke about the early stage VC firm’s investments and experience in the tech hardware space.

On tech hardware, he pointed out how startups in this space have more to think about when creating their product. “They have to think of the software and the hardware and how they need to connect with each other.”
Matt Turck of First Mark Capital hosted the meetup.

Nir Eyal talks about his latest book, ‘Hooked: How to build habit-forming products

Nir Eyal
Nir Eyal

By Dennis Clemente

How do you like some structured thinking to go with your startup brainstorming?

The New York tech meetups happening in the city every night are wholly unstructured. It’s just a channel for startups to quickly demo their product and, even in some cases, get feedback from startups, right on the spot. Some presentations may do better in the on-the-fly, off-the-cuff talks, but there’s always no guarantee. What’s guaranteed is how you get the chance to watch a startup founder talk about a work in progress.

Last November 4, structure came to the Alley NYC Meetup when Nir Eyal launched his book there that day called “Hooked: How to Build Habit-Forming Products.” Eyal certainly gets my nod for being one of the most lucid presenters in the NY tech meetups this year and it’s perhaps on account of how he has formulated a clear basic framework on the subject for a couple of years now, which was evident in his presentation.

It also helps that he has taught at the Stanford Graduate School of Business and Hasso Plattner Institute of Design. His writing on technology, psychology and business appears in the Harvard Business Review, The Atlantic, TechCrunch, and Psychology Today. Nir blogs at NirAndFar.com.

The book is a must-read if you are designing a new startup or leading a product development team, as it talks about behavioral uses of technology, apps and social media while also leaving room for us to tackle the hard ethical questions on forming habits. His basic framework is as follows:
1. Trigger
2. Action
3. Variable reward
4. Investment

Triggers: (Internal and External).
Do you know your user or customer’s internal trigger? Find out your user’s itch. People always look for associations, solutions and patterns. It cues the user for the next action, telling what the user what to do next. Look for associations. Ask yourself, when you are bored, what do you do? You go to YouTube? Do you know your trigger? Do they fear missing out on something?

Action.
It is the simplest behavior in anticipation of a reward. Once you have them using your app, what can they do to get a reward of some sort? He cited Facebook’s “Like.” That is a powerful reward that makes people keep coming back to the social network.

Variable reward.
This is social validation among friends or personal gratification. For example, there are 5,000 questions answered daily on Stackoverflow, which indicate how people like to share their knowledge without asking for anything in return, contented as they are that it makes them feel good helping people. People also like feeling a sense of self-achievement or mastery, consistency and control.

Investment.
Users invest for future benefits. Investments store value, improving the product with value. Unlike a chair which depreciates in value, your startup should appreciate in value. The more followers you have for example, the better your value.

Also check out his blog, nirandfar.com

Tiggly, Dweet.io among standouts at NY Tech Meetup demo night

nytechmeetup114

By Dennis Clemente

How do you pack in 12 startup demos in two hours? Last November 3, the NY Tech Meetup did it again with Tiggly and Dweet.io among the standouts of the night at Skirball Theater at NYU.

Every parent sees their kids using digital devices more, which also means less physical playtime for them. Recently funded for $4 million, Tiggly has found a way to merge both physical play with the digital world in its tablet app. It has developed game apps and physical objects used in tandem with tablets to help educate kids using conductor silicon. The startup has clearly found a sweet spot between a toy and an app.

CEO Peter Semmelhack presented dweet.io, a Twitter for things. You dweet, say, a public swimming pool temperature or air quality in a city. It’s Twitter for machines, sensors, devices, robots and gadgets, enabling data to become easily accessible through a web-based RESTful API.

Built from day one for commercial and enterprise deployments, a dweet payload can reach up to 2,000 characters. It’s public by default but you can make dweets private by purchasing a lock which are then applied to thing names. Each locks costs $0.99.

It only holds a thing’s last 500 dweets for up to 24 hours, then it’s history. But you can build a connector to your data store of choice such as Dropbox, AWS and Tempo-DB.

Next presenter, Admitted.ly positioned itself like how online dating works. It is a free platform that helps high school students find their dream colleges and universities, connect with mentors, and get accepted.

A “graduate” of ER Accelerator, Admitted.ly works as an outreach for high school students and guidance counselors but in a fun, engaging way. It even has walkability directions among other useful guides when choosing a school.

Another presenter, BugLabs, is a software company that focuses on providing easy enterprise application development tools for the Internet of Things.

Keezy’s presentation was perhaps the first unspoken one in NY Tech Meetup’s decade-long history. The demo showed how the music software works using two if its music apps, Keezy and Keezy Drummer for iOS, easily that even kids can play around with them. You can record different sounds on Keezy but the Drummer is just one kit.

Not all presentations are crowd-pleasing but some marketing people listened intently on how Offerpop works to create marketing engagement platforms for today’s social and mobile consumers—and how it helps the best brands, retailers and agencies in the world connect, engage and convert consumers.

Launched last September 29, Parcel offers off-hours delivery service in New York (not including Queens) for only $5 (not heavier than 30 pounds, no higher or longer than 2 feet). You can select a one-hour delivery window.
Other presenters include Simple Machine, crafter of gaming experiences and stories like The Outcast as well as SquareSpace which now integrates Getty Images in its CMS platform for people to buy photos to use directly on their sites.

Waywire Networks talked about how its curating all the videos to make it easy for everyone to find the videos based on their interests. Each channel is authored and “highly niched.” It hosts content and is currently looking for curators
The Hacks of the Month were Calcash, an 8-bit online arithmetic battle game that makes learning and solving problems fun, accessible, and competitive; NewsFeel, which graphs the New York Times articles on any topic based on sentiment and lastly, Nodeflow, a just-in-time synchronous Javascript compiler that makes Node.js development easier.