IEEE-CNSV Panel: Successful Consulting Engagements With Startups
I will be moderating a panel on “Successful Consulting Engagements with Startups” at the May-21-2013 IEEE-CNSV meeting. The genesis was an e-mail thread on the CNSV list last June that started with this question:
I have a new client which is a very-early-stage start-up, funded by one of the founders out of the proceeds from the sale of a previous company. They would like to pay me for my time using a cash/equity mix. No doubt some of you have done this before, so what pointers can you offer as to structuring the arrangement? It’s a small amount of work, so the downside risk is low, and at some point I’d expect it would switch to all-cash compensation.
There were a number of good comments contributed either on the list directly or in subsequent face to face discussions at CNSV meetings and this panel is an effort to walk around the set of issues that consultants face working for very early stage firms and very early stage firms face in trying to assess and contract with consultants.
When: Tuesday, May 21, 2013 7:00 PM
Cost: Free / No RSVP needed
Where: Agilent Technologies, Inc. – Aristotle Room, Bldg. 5 5301 Stevens Creek Blvd., Santa Clara, CA 95051 (Map & Directions)
Startups often need a consultant’s expertise but their limited resources can make for riskier and more complex fee arrangements than larger companies. A panel of three consultants–two of whom are also serial entrepreneurs who have founded technology startups–will offer their perspective on the practical realities of working for startups. This session will outline important tips and issues to consider if you are exploring investing your time working as a consultant for a startup. The panel will share their rules of thumb and stories from the trenches. Consultants and technology entrepreneurs are invited to take part in a candid discussion.
Panel:
- Chris Apple, Software Consultant at Apple Enterprises
Chris Apple founded Apple Enterprises in 1981; he specializes in embedded firmware, control software and application software. He develops the embedded product, the PC control application, the manufacturing and calibration application and even the installer: he takes a concept and makes it a product. - C. M. Kip Clyde Brown, PE, Principal at CMBJR Consulting, Inc.
Kip Clyde Brown, PE is a Professional Engineer with IC design experience in analog and mixed signal. In addition to his consulting experience he does expert witness work and is an at-large director of IEEE-CNSV. He has also founded three startups and will be able to provide insights from both sides of the table on the topic of startups hiring consultants. - Arthur Keller Ph.D., Managing Partner at Minerva Consulting
Dr. Arthur M. Keller is Managing Partner of Minerva Consulting. Dr. Keller serves as an expert witness on patent infringement cases and as advisor to startups. He has served on the board of several startups, including Persistence Software, where he was Chief Technical Advisor prior to its IPO. He has also co-founded several startups, including Mergent Systems, which was acquired by Commerce One. - Moderator: Sean Murphy, CEO of SKMurphy, Inc
Sean Murphy founded SKMurphy, Inc in 2003 to focus on the marketing and sales challenges that technology firms face in introducing new products successfully. He has helped with hundreds of technology entrepreneurs either in a direct consulting capacity, through hands on workshops, or by moderating more than 250 Bootstrapper Breakfasts® in Silicon Valley since 2006.
This talk will share
- Tips for engaging with startups
- Tips for getting paid
- Rules of thumb about taking equity
- Managing IP issues.
- Lesson learned
Key Slides: Consulting Engagements With Startups
- Overview: Five Sources of Consulting Fees
- Savings / Retained Earnings
- Current Revenue / Cash Flow
- Outside Investment
- Future Revenues (Near Term, Longer Term)
- Future Investment (e.g., Acquisition)
- Overview: Other Compensation
- Long Term Relationship with Founders
- Referrals
- Success Story / Testimonial
- Building Expertise In a New Technology
- Building Expertise In a New Market
- Chris Apple, Apple Enterprises
- Reward: New technology and keeping current.
- Risk: Not getting paid or ending prematurely.
- Reduce risk by knowing founders.
- Startups do not stay in business.
- Startups cash comes in waves creating lulls.
- Startups end abruptly. Invoice frequently.
- Do not burn out. Plan for the long haul.
- Kip Brown, CMBJR Consulting, Inc. Consulting for equity / Royalties
- HA chip – first WDRC aid – Disruptive technology
- Winchester optical head position sensor – 2X
- 1 of 7 “in spec” chips made volume production 6 of 7 revised spec after FDR
- Review the end product / Market / Competition
- Share risk but no “out of pocket”
- Invest a few “free” hours to insure long term pay
- Customer’s integrity and financial stability
- Dr. Arthur M. Keller, Minerva Consulting
- Portfolio approach
- Income deals, equity deals
- “Take stock when company wants to pay in cash, take cash when the company wants to pay in stock.”
- Or get some of each
- Put some time at risk to get to know team, especially when you take stock
- Criteria:
- Do you like the team?
- Do you like the technology
- Do you like the market?
- Buy stock or take options?
- Sean Murphy, SKMurphy, Inc.
- Plain English Agreements, Not Contract
- Clarify Mutual Expectations
- Expect a Full and Frank Exchange of Views
- Trust is Built Over Time:
- Don’t Assume You Have Their Trust, Earn It
- They Don’t Tell You When You Lose Their Trust
- Chris Apple, Apple Enterprises
- Three stories about long term relationships
- Digital F/X (4 years) Created OS and hardware.
- Light Source (6 years) Apple ADB and scanners.
- Ciphergen (7 years) Biological mass spectrometer.
- Look and suggest new projects.
- Startups leads to more startups.
- Tackle projects outside expertise.
- Service Business so provide service.
- Three stories about long term relationships
- Kip Brown, CMBJR Consulting, Inc.
- Hiring consultants for a start up
- TEC – an umbrella consulting company
- Hired over 20 consultants, less than half met goals
- On average assume 2X estimated hours
- Evaluate technical skills, not fancy dress
- Check references, past successes/failures
- Meet with other team members
- Recognize consultant’s strengths/ weaknesses
- Provide assistance and guidance as required
- Dr. Arthur M. Keller, Minerva Consulting
- Persistence Software story
- Chief Technical Advisor 8 years, incl. Board 5 years
- Paid cash, but also received stock
- Advisor
- Who is “real” client?
- Role, purview
- Board member
- Legal responsibility
- Insider or outsider
- Sean Murphy, SKMurphy, Inc.
- Final Questions for Panel on Consulting Engagements With Startups
Deck at https://californiaconsultants.org/wp-content/uploads/2014/05/CNSV-1305-Murphy-Apple-Brown-Keller.pdf
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