When David Knight founded the data-trading platform Terbine last year in the Bay Area, he immediately recognized the saturation of startups in the Silicon Valley and the high cost of doing business there, and he set out to relocate.
The serial entrepreneur narrowed his search to two possibilities: Austin, Texas, and Las Vegas, with Southern Nevada emerging as the front-runner.
“There is a growing technology community in Las Vegas and a lot of people who would like to see Southern Nevada become a technology hub,” Knight said. His company Terbine is a broker through which companies can buy and sell data collected from sensors. “We wanted to be one of the anchor companies in this vibrant market.”
There was one possible deal-breaker.
Attorneys Mary Bacon and Mark Hawkins work with the Fennemore Craig venture accelerator program.
“We realized there’s not as much infrastructure and support systems in place here for tech startups, so we wondered if we would be able to find the services we needed,” Knight said.
A colleague suggested Knight get in touch with law firm Fennemore Craig, which in late 2013 launched a venture accelerator program and emerging businesses and technologies department, designed to help entrepreneurs avoid common rookie mistakes and steer clear of pitfalls throughout the startup process.
Run by attorneys who specialize in startups, the venture accelerator program offers legal advice and tailors its approach to need. Topics for which help is offered include raising capital; protecting branding, technology and other intellectual property; labor law considerations; engaging in the market; securing office space; and litigation.
But there’s much more to the program than a little lawyerly hand-holding. In breaking with the traditional legal mold, Fennemore Craig adopted an approach that’s common in the Silicon Valley but new to Southern Nevada.
“One of the biggest issues facing startups is lack of capital, so in this program, we can defer a small amount of legal fees and also put up a small equity investment in the company through a separate fund,” said Mark Hawkins, a director with Fennemore Craig, which employs almost 200 attorneys and more than 400 employees in offices in Las Vegas, Reno, Denver, Phoenix, Tucson, and Nogales, Ariz. “Silicon Valley firms often offer such programs, but we’re the only one in Nevada that I know of.”
Fennemore Craig has helped clients with such basic legal tasks as getting business licenses, issuing corporate charters and establishing bylaws and articles of incorporation, as well as more complex matters specific to tech companies or businesses taking on venture capital. Those issues include stock-purchase and stockholder agreements and employee stock-option plans.
“We selected Fennemore Craig over some very prestigious Silicon Valley firms and realized they are the only firm in the region that was speaking our language,” Knight said. “It’s complicated from a legal standpoint, so having a group of people who really understand the law in Nevada, as well as the world of federal legislation, is very important moving forward.”
Fennemore Craig recruited Roy Farrow, formerly with Palo Alto, Calif., mega-firm Wilson Sonsini Goodrich & Rosati, to help develop the program. Wilson Sonsini Goodrich & Rosati, a leading provider of legal services to technology companies worldwide, offers a similar initiative and has worked with a slew of big-name startups.
Roy Farrow
“Roy is a really sage technology industry attorney who comes from a prestigious Silicon Valley firm, and he brought that DNA with him when he came to Nevada,” Knight said.
Serial entrepreneur Thomas Typinski also applied and was accepted to the venture accelerator program. Typinski, an Army veteran and competitive bodybuilder who launched three tech companies in the Bay Area, recently launched Peak Physique, a mobile iPhone application and fitness progress tracker.
“I did my first two companies through LegalZoom, but the third one was much bigger, so I used a company in California that was familiar with deferred payments,” Typinski said. “When I sold my shares in that company and started Peak Physique, I wanted to have the same type of structure here in Las Vegas, and I went with a local firm who immediately sent me a random bill for thousands of dollars.”
Disgruntled, Typinski broke off that relationship and resigned himself to the fact he was on his own.
A chance meeting with Fennemore Craig associate Mary Bacon changed his tune.
“The program they have catering to the Vegas tech scene is really rare here, but the concept was familiar to me because of my experience with Silicon Valley law firms,” Typinski said. “This is my fourth company, so I kind of know what to look out for, but it’s great to have the team for support.”
So what kind of companies are a good fit for the program?
“We try to identify promising startups that have a significant opportunity for success,” said Farrow, who oversees the program for all six Fennemore Craig offices. “There’s an old adage that ideas are a dime a dozen, and there are a lot of great ideas out there. But having a really good idea is only a small step in building an enterprise. You also need a skilled and experienced legal team, a complementary management team and a viable business model to take that idea to a successful conclusion. Historically, most new companies fail.”
In fact, according to a recent Harvard Business School study, more than 75 percent of startups go belly-up. Cash-flow problems are among the leading causes.
Fennemore Craig has a fee-deferral component to the venture accelerator program to help ease that initial financial squeeze.
Despite participating in startup seminars and workshops to raise awareness about the program locally, only four companies have qualified because the vetting process is so rigorous.
“This is an ongoing program that we will continue to develop,” Hawkins said.