Dave: Hey everyone, Dave here with another episode of the Philly Tech podcast. Today I’m speaking with Richard Rogers. Rich is a corporate attorney, former marketing executive with over 20 years of experience as a Forex founder CEO CMO attorney and account-based marketing expert. Richard offers a unique blend of counsel on critical aspects like brand establishment, company formation, startup fundraising, IP ABM driving gr. He helps startups as an attorney trusted advisor and really understands the intricate blend of startup challenges in all different types of departments: legal, marketing, tech, business strategy. Richard recently launched Startup Tech Law which we’ll be talking about. It’s a new law practice focused entirely on helping Founders from formation to funding and beyond. Richard, how are you doing today?
Richard: Good, thanks for having me, Dave. My pleasure. I always love to talk with people that know a lot about things I don’t. And that’s definitely the legal space is one of those. I love your background, by the way. You definitely have the best background of anyone I’ve talked to so far. Tell us a little bit about your background and this new venture of yours, Startup Tech Law, and what your plans are.
Dave: Thanks. I’ve been in the Philadelphia area pretty much my whole life. Went to Temple Law. Got out of Temple Law and worked for what was a big firm at the time in the Venture cap and Tech group. Having been a startup since I was 16, I had my first idea back then and my first company. I really got to say, it’s fun to be in Philadelphia, but the startup community here has never been like it is now. For me, having started back as a lawyer 20 years or so ago and being involved with the startup community, seeing it evolve, it’s amazing where it is now. So, I’ve got to say kudos to you for helping this community grow and involved. What got me into this… you know, I left my law firm to start a company and got right at the right time. The dot com boom just after I left happened, and you know, we had funding, we lost funding. I went through the trials and tribulations of being a startup founder, kept it going, and fortunately got the Philadelphia Eagles as my first client. My company was 3D Tour, and we were a national virtual tour, high-end virtual tour company. First one. So, after the Eagles, we got the Phillies, and then hotel chains started coming in. I evolved that into a marketing agency, which became 360 media, and 3D Tour is kind of still around. If you ever go to Zillow, you’ll see that little 3D Tour icon next to where you see the pictures and all. So, that was what we started actually with real.com back then, working on. Got that approved and it’s kind of nice to still see that even though the technology is kind of outdated and gone. But that propelled me into working in-house for my own agency, and I worked with a number of different companies around the globe. Looking back, I probably did more legal work back then than I even realized, and if I was even at a firm, just all the things that were being thrown at me. And I really loved doing it for some reason. A lot of lawyers don’t like doing legal work sometimes, but it was enjoyable for me. So, keep growing and going from mobile marketing, social media, and growing that, and then getting into different startups. I had another mobile marketing startup after that which was here in Philly called Lou, and after that, another one called Goen that was later acquired by competitors. I got to work overseas and in SAS unicorn, came back to Philly, worked at a company called Agilant and helped grow and build their digital marketing department, an internal agency from the ground up. And all the while, being hit with GDPR questions, California privacy was happening, working through data privacy issues with millions of data sets and customer records and segmentation. There’s tons of challenges. I really appreciated the time I spent actually doing a lot of the legal research on this and decided about a year ago that I’m going to put my passion into something and came up with this idea for Startup Tech Law. And I thought a lot of Founders in this area are probably sitting there like I was at one point, but without the legal background, education, and experience. And how can I help them sort of go from, as you said, formation to funding? And I’ve been through a lot of those. I’ve gone through Ben Franklin Tech Partners, had VCs, and you worked with a big law firm in Wilson City, which was like the law firm to get into at the time if you were a startup. You want to go there and sit in P Auto. This was a fun ride. But for me, I look back at the experience I’ve had, great attorneys here, and I just think that most of what I learned from them was probably very little to do with the law. It was more of an advisory counsel position. You know, sometimes you’re a startup founder, you can get kind of lonely because it’s just you at the top, and you’re trying to do a million things at one time. And just having another, you know, say shoulder to cry on or something to give a high five to when things are going well, but also knowing somebody you can really trust and has your back. And that’s really what I was thinking about when I put this together and started thinking about not just law, but marketing. I’ve done a lot of stuff and worked for a lot of companies, SAS unicorns to enterprises. How can I help merge what I’ve done with marketing into a law practice? How do I merge my founder experience into a law practice? So, I thought Startup Tech Law because most of the companies I worked with, or all my companies were in tech. And I’d love to focus on startups and helping those Founders out.
Dave: I love that. You’ve kind of walked the walk, right? So you’ve been in the founder shoes. You’ve led marketing teams and departments. So that, I think, makes your legal advice even more potent in that way as having kind of played the dual role of that. You mentioned Startup Tech Law is kind of, you know, from formation to funding. We normally keep these podcasts on the shorter side, but to the best we can, let’s see what we can kind of cover in that journey. You know, Philly Tech is a community of a lot of varied stages. So let’s start with formation. You know, what are some of the things that people need to be thinking about when they’re forming a company? Some of maybe the common legal structures and differences that they might want to consider. And above all, you know, when is the right time? You know, when is the right time to basically say now I should form this company?
Richard: Good question. I think the right time, for me, it’s always been when I’m really ready to commit to it. You have an idea, you play around. You know, now you’ve got no-code tools out there. You can kind of see if it’s something. But when you’re ready to personally commit to it, that’s when I think that’s the time for you to incorporate. What I would honestly recommend to a lot of startups: what do you want to do? Where do you want to go with this company? And if it’s a car wash in Philly, you’re probably not going to set up a Delaware C corp, you’re not going to issue shares. An LLC is probably good for you. If you’re thinking about eventually I’m going to get a venture capital funding round, you know, a priced round, or if you’re looking for Angel Investors now and thinking about co-founders, where do you want to go? And that also helps me figure out what’s the best, you know, what’s the best vehicle to put them in? And from a tech standpoint, everybody that I talk to says we’re going to raise millions of dollars, we’re going to have co-founders. And at that point, you’re more likely than not thinking we’re going to put you in the Delaware C corp. Then the question becomes, well, I’ve got two other Founders. How much do I take out? How much do they get? So working across the founders, you want to make sure that you’re giving everybody the right advice and being fair, but also making sure that the company’s protected. If you start out on shaky ground, in these companies and startups in particular, it will actually, in most cases, I’ve seen it fail because the founders start fighting each other. And when founders don’t get along or there becomes a fallout with them, that’s one of the top reasons why they fail. So helping prevent that as well in the early stage is really important. I’ve had clients come to me and say, well, they didn’t give me enough shares in the beginning, and now we’re going to go through a funding round and I’m going to lose equity. What do I do? I’m really mad at them. And you kind of, if you fix these things early, I think you can prevent a lot of problems down the line. But yeah, that’s part of being a startup, is learning that as well and knowing how much equity, how many authorized versus issued shares, and how many co-founders and the split would be on that. And then you’ve got these great tools at your disposal. You can build out and use for your cap table management as you go forward. And just explaining all of that to founders for the first time, it’s kind of an eye-opening for them. And for me, it’s enjoyable to make sure that I’m helping that founder get started on the right foot.
Dave: It’s a great explanation. When you say something like, you know, when you’re ready to commit, because every business is different. Everybody’s kind of journey is different. But that’s like a benchmark that we can all kind of relate to. It does not apply to some particular revenue metric or sort of life event necessarily within the business. It’s much more personal. And I think that kind of speaks to like a more global audience. You already started to sort of segue into where I was going to go next, which was sort of the equity question. Again, the nuances here, this is probably a devil’s in the details type of conversation, but what are some of the common stakes you see when it comes to equity and dealing with the founder, I guess, compensation packages so to speak, that often come back to bite people later on when maybe they’re raising money or whatever it may be?
Richard: I think one of the biggest red flags also for investors is when you have founders that never have that conversation. They go into it where they may be 50/50, but one is really the lead, and they’re the one that should have more equity. When you go into those 50/50 splits, sometimes that doesn’t really work out because the other founder, and this is from experience, they don’t really provide much after the first five, six months. And you see founders that get stuck because their co-founder had equity that they really don’t deserve anymore or have really earned. So this is where you put in a vesting schedule. You have a founders agreement set up from the beginning, and that is just one of the pitfalls that you’ll see as two founders get together, haven’t done this before, and let’s start a company. Let’s split it 50/50. And then one gets married or divorced or something happens, and then they take off or they stop writing the code, or they got another job or something that they have to commit to. And you’re stuck with this dead equity weight that you have to figure out later, and that could hurt you in future rounds even getting funded.
Dave: Yeah, I have made this mistake myself on multiple occasions, and I know I have things to learn, but I like to think of myself as not completely new in the field, and yet having started several businesses have sort of made the mistake of kind of, you know, what is the right way to approach equity, getting that founder agreement, what are the right expectations that each person should have and sort of how long the engagement should be? There’s a couple of words that you mentioned that in the event that someone may be hearing them for the first time, I’d love if you could elaborate. You talked about vesting. Can you kind of explain that concept and sort of how important it is to this whole thing?
Richard: Absolutely. So working with founders that bring in, especially they bring in a tech co-founder later, it’s a good example. You’d want to set up your company so that you’re not just giving away 25 or 40% of your company right off the bat. You want to set it up so that over a period of time, maybe it could be a one-year cliff or three months where that’s when they get that 25% of whatever share you’re going to give them in total. And then over the next few years, they have to essentially stay and earn it. Which, honestly, I can also say from a founding founder standpoint, that vesting schedule goes both ways because now you’re in that company, you’ve spent two years, what can we do to help protect you as well? Because if you do get an invest round and let’s say that the board decides to go in a different direction and hire a different CEO, you’ve put all the time, you’ve done all that work, and now they just want to cut you for no reason. That’s another problem as well for co-founders where you want to have that protection, where that might accelerate or we put in some type of exit package. But mostly for founders, you want to have that ability to make that person that you bring in, and it very much is like a marriage. Every founder I talk to that brings in a co-founder, you’re going to get married to this person for several years. You better like them. And if not, we’re going to build a prenup for you, which is that founders’ agreement. We’re going to make sure that they’re not getting everything if they decide to leave in three months. And if they’re here for a year and they stop working at that point, let’s make sure that you have the ability to get that back.
Dave: Yeah, very wise words there. And I think that kind of ties a little bit into another thing you had mentioned, which is dead equity, which I think refers to kind of equity that someone owns when they’re not really contributing to the business anymore. So really trying to kind of minimize that. Moving along to the fundraising part here, and sorry to sort of rush the conversation, but certainly some people think that fundraising may be the path for them. And it’s always nice to kind of know what may be in store for you and how that changes things when you think about equity and things like that. I’ve heard about people, you can get diluted with fundraising and things like that. So again, with regard to fundraising and the equity and the agreements that you kind of set up front, things to know, things to be wary of as you approach that?
Richard: I approach it very, very similar to what I would do in account-based marketing, actually. In account-based marketing, we build out the ABM pyramid, which is we have one-to-one, one-to-few, and one-to-many targets. Think about that when you’re looking for fundraising and for investors. Your one-to-one is your whale. If you got them, they are a partner. They’re going to help you. You’re going to eat for a year. You’re fine. Then you’ve got these second layers, which are good, and maybe 10 or 15. Then you got this mass. So when I look at fundraising, I think about what type of company you have, which type of investor invest in that and at that stage, and which ones would be a good fit for you. Also, personalities do come into play here. Some investors are amazing. I’ve had them. And it ranges from Angel to Series A. You’re going to find those that are partners with you. They will be there every step of the way. And then others will bug the hell out of you for no reason because they have nothing else, it seems like, to do in life. And you don’t want that. You need to focus on your business. So, I call them penny slots investors here, where they’re just like, Rich, really rich people that go into a casino, and they just sit there and they put nickels in a slot machine. You know, and they don’t care if they win or lose. And it’s like, they’re just playing the game. You don’t want that. You want somebody that’s really going to help you and invest in you and also make introductions for you, help you get into that next round. And that’s part of the process, understanding who’s out there and which type of personalities really kind of gel together. I think that’s really important. And then how do you get the introduction into them? As you said earlier, the elevator pitch, the pitch deck, and it’s building that trust in the beginning, having little things like we worked out our founders’ agreement in the beginning. We’ve gone through that. It shows that you know what you’re doing. You’re a bit more prepared. If I could help you get to that point where you’ve got the pitch down, you’ve got all the T’s crossed, and I’s dotted, and the package is just a beautiful, shiny object for that investor to say, “This is solid. I like this idea, and I like these people that I want to invest in.” It’s not just about the money, I guess. Investors is a relationship where like you mentioned, it’s business development, it’s helping secure the next round, there’s so much more. It’s just counsel and advice, introductions to service providers. You have to kind of think about the big because you’re generally going to have a finite number of investors, if any. So, you kind of want to make sure that they’re adding value in all different types of directions. Great conversation with you, Richard. Really appreciate you distilling what is relatively complex kind of nuanced startup financing into a 20-minute or so conversation. For people that want to discuss this topic further with you, maybe understand more about what founder agreements look like, or just have you explain cap tables to them, where can they get in touch with you?
Richard: StartupTechLaw.com or LinkedIn with me, Rich Rogers 360. I’d be more than happy to help out. Free consultation. And I started this to also, in a way, become more like a software company with a very customer-centric approach. So, subscriptions, flat fees, upfront pricing. I’ve been in that startup chair where you get a $155,000 legal bill at the end of the month, and you’re like, “Whoa, what is this?” I want to avoid that for my founders as well and be really upfront and make it as affordable as possible for them at that early stage, getting going. So, StartupTechLaw is the best way to reach me.
Dave: Awesome. Yeah, I didn’t want to be the one to say it, but lawyers are known to be expensive, deterrent for people where they’re not exactly sure about the business and what the return is going to be, are they ready to invest in these different things? So, I love that you’re kind of pursuing this alternative model that sounds more approachable. So, thanks very much for your time today, Richard, and I look forward to catching you at an upcoming event.
Richard: Thanks, Dave. See you soon.