Yesterday I attended the Des Moines Business Record’s Power Breakfast series featuring an expert panel discussion on whether Central Iowans are too risk averse to start businesses. It was well attended and an excellent discussion on the topic, although the topic probably deserves more time and attention than is available in a breakfast. I applaud the Business Record for making the issue more visible.

As a lawyer working with startup businesses for the past 17 years, I’ve seen hundreds of people take the leap of faith to start their own businesses. So it’s a little hard for me to accept the notion that Central Iowans are "too" risk averse to start businesses. Try telling the startup business owner that couldn’t afford Christmas presents one year for his kids after he started his business that he’s too risk averse. Or, perhaps the retailer that struggled for three years in a difficult economy and personally guaranteed a lease. And, I wouldn’t want to tell the couple who invested their life savings in a franchise that they are risk averse.

Instead, when we say that Central Iowans are risk averse to startups, it seems what we are really referring to most of the time is the lack of investment capital available through angel investors and venture capitalists. Admittedly, It’s slim pickings in Iowa if you need significant capital. Many businesses end up going to the coasts for investments. During the panel discussion, someone mentioned that it will take a company like Dwolla making it big so that investors in Iowa would realize what they missed and hopefully invest in the "NEXT" startup. While they may happen, I think it’s more likely the owners and employees of a widely successful company will be the ones who will decide to invest themselves in the "NEXT" startup. But to date, Central Iowa just hasn’t had that widely successful venture that is poster child for the investment community.

One of the panelists, Christian Renaud, has an excellent post you should read on this subject. The comments are insightful as well. Christian is one of the founders of Startup City Des Moines and should be creditied as one of the leaders in bring awareness to an ever-improving startup community in Central Iowa.

But, as Iowans, I’d stop asking whether we are too this or too that. We aren’t Silicon Valley nor do we need to be. However, it would be terrific to see a greater flow of capital into startups.

So, what do you think? How do we continue to improve the startup community in Central Iowa?

 

With emerging companies I am often asked about equity and stock options for employees. That process is often complicated and costly. Usually the reason I hear favoring the equity / options approach is that employers want their employees to "feel like they are a part of something." An admirable goal ineed but are equity /options necessary to achieve this goal?

Mike Colwell of the BIZ recently referenced on his blog a post by Jason Fried of 37 Signals. I highly recommend you read Fried’s post on "An Alternative to Employee Options / Stock Grants." 

The BIZ also ended its Dream Big Grow Here regional contest for Central Iowa this past week. The big winner was Real Estate Fan Pages and its owner, Matthew Smith.

 

Our new startup company, Notifyworks, Inc. has officially launched its Web site today. You can check it out at www.notifyworks.com. The site also contains a blog which will cover client relations and legal technology issues.

Notifyworks is a software system that allow you to set up proactive notifications to clients that are timed to automatically go out in advance of important dates and deadlines.

Be sure to check out the video on our home page and whatever you do, "Don’t be Dick!"

Once a mainstay of this blog, I have not written about employment law for quite some time. Since my franchise law practice has grown over the past few years, I’ve left it to Matt Brick from Brick Gentry to handle employment law issues in the office.  On the blogging side there are many great employment law blogs to follow including Daniel Schwartz of the Connecticut Law Blog and Jon Hyman of the Ohio Employer’s Law Blog. Their blogs are terrific resources for anyone interested in employment law.

Another employment law blog that has come on the scene is the Iowa Employment Law Blog written by Patrick Smith of Des Moines. I’ve known Patrick for years and his blog is also one you can trust for up-to-date content on employment issues.

But the reason I am writing on employment law in this post is because all employers should definitely be aware of a new National Relations Labor Board (NLRB) rule that requires nearly EVERY private sector employer to post notices about their rights to unionize.  While there is some debate over whether the NLRB has the right to require the postings, the rule will go into effect on November 14, 2011. The failure to do so could result in an unfair labor practice. I am sure this would be quite the surprise for most small (or even large) businesses.

For more information, see the postings by Jon and Patrick on the topic.

This blog post from the Minnesota Business and Real Estate Blog discussing the Fallacy that LLCs require less paperwork is spot on.

Many people come to my office wanting to set up an LLC because it is easier to "manage" than a corporation. But even with an LLC, it is important to follow corporate formalities as described in the post including documenting important decisions such as loans, issuance of membership interests, major capital purchases, leases, and the election and removal of managers/officers and board members.

Plus, in the state of Iowa you must file biennial reports with the Secretary of State whether you have a corporation or LLC.  For the typical small business owner, it does not require significantly more work to have a corporation than an LLC.

The decision to form a corporation or LLC involves several factors. But in my view the amount of paperwork is not one of them.

Earlier this week I applied for a charge card for my new business. As a part of the application, I was informed that I would need to personally guarantee charges, not only for my card, but also the cards of any other people under the account. Fortunately, this did not come as a surprise because I had already seen this bite unsuspecting business owners and/or executives in the past through my law practice.

In one instance I represented the vice-president of a company who was a part of a four-person management team. The vice-president was the named account holder but he thought the other members of the company’s management team were equally liable for the debts on the account. Not so. So when the company folded, the charge card company had his personally guarantee but not the personal guarantee of the other members of the management team. Naturally, the charge card company pursued only the vice-president for the debt.

In another instance, an office manager (yes, an office manager) was pursued by a charge card company for BUSINESS expenses charged when the owner of the business died without adequate funds in his estate to pay for the debts. We argued no personal guaranty existed and that the office manager had never agreed to the terms on the account but the fact that charge card company pursued her cost her legal expenses and much aggravation. 

So beware of personal guarantees on charge cards. You may be accepting more personal liability than you suspect. Always inquire when applying for a new card and make sure you understand the extent of your personal liability.

Via the Silicon Prairie News:  The Dream Big Grow Here contest for Central Iowa has officially begun. Take a look at the pitches and vote for your favorites. It appears like it’s going to be a close race. I am impressed with all the ideas but I am partial to the legal startup, FInalize It.

As they say, vote early and vote often!

For the past 17 years, I have been advising businesses of all shapes and sizes, whether small or large. I have always loved working with startups. It is exciting to hear the stories of these entrepreneurs and how they could solve a problem or discovered a new way of doing business.

Now I am leaping into that startup world with my own company called Notifyworks. Notifyworks is an automated client notification system. We are currently continuing with our beta testing but anticipate launching formally September 1, 2011. My partners, Mike Colwell and Brian Hemesath, bring a wealth of experience and I couldn’t be more excited to get our company off the ground.

The idea from Notifyworks developed out of my law practice. In almost every contract or legal matter, there is some sort of follow up needed. It might be a termination date, a renewal or some other deadline. Too often these dates are ignored by clients until the last minute, or worse, forgotten entirely. What Notifyworks does, in a nutshell, is make sure lawyers and their clients never miss one of those dates. It’s a great solution for any professional or business that routinely deals with contracts and deadlines.

Unlike your calendar or docket system that still requires you to take action, Notifyworks removes surprises or last minute scrambling by allowing you to set up proactive notifications that are timed to automatically go out in advance of important dates and deadlines. The system is easy to use and we have a notification library with message templates or your own customized messages that will save you valuable time in the process.  I think most lawyers will even generate more work from clients that see their lawyer cares and is on top of things.   The whole idea is to deliver great service and build strong relationships with clients.

I am excited to discuss Notifyworks and other stories on the Silicon Prairie News Prairiecast this afternoon at 2:00 p.m. If you miss it live, please be sure to check out the archived podcast.

If you are interested in joining our beta test group, please send me an email at rush@notifyworks.com. Be sure to let me know if I can answer any questions. 

If you are currently starting a business or thinking about starting one, I suggest you read a couple of articles via the Des Moines Register business section.

Five Things You Should Know About Raising For Your Startup with advice from Mike Colwell. Mike is the executive director of the Business Innovation Zone and a terrific resource for any startup or early stage business.

Five Things You Should Know About Starting a Tech Company in Iowa with advice from Christian Renaud. Christian is the founder of StartupCity Des Moines. Startup City is a new technology incubator in Central Iowa.

Guys like Mike and Christian are available to mentor and assist new business startups. If you need help (or maybe even if you don’t think you do), it would be worth talking to these guys. They’re experienced and have been instrumental in helping develop an increasingly popular startup business culture in Des Moines.

 

A guest post from Dwolla founder Ben Milne on the Silicon Prairie News site says what I have been saying on the legal side for years: Iowa is a great place to start a business (and incorporate).

It’s fantastic to see companies like Dwolla enjoying success and creating considerable buzz. I’ve long thought that Iowa just needs one of its start ups to blow up and it could kick start a whole generation of entrepreneurs. It happened in Seattle with Microsoft and in Austin with Dell. Why not here?

I like Ben’s post but I suggest that you Zoom Past LegalZoom. In particular, the Iowa LLC laws have changed in the past year and I would trust only an Iowa business attorney if you are drafting operating agreements for multiple partners. It could have a big impact on keeping you out of court down the line.