Archive for the ‘Software’ Category

Announcing AlphaTakes—Videos for Emerging Technology Companies

We are excited to announce that in coming weeks, we are starting a new video series called AlphaTakes. The goal of the initiative is to provide clients and others with background on the variety of recurring issues that emerging companies face through their development, from startup to sale.  Our hope is that the videos will supplement the existing articles for emerging technology companies that is already contained on our website.

Technology Company Startups

For startups, we plan to cover topics such as the incorporation process, allocating founder shares, common mistakes of startups, and calculating the stock option pool.  We have a number of other ideas as well, based on the questions we receive from entrepreneurs.

Scaling Technology Companies

For operating companies that are scaling, we plan to have videos that go over the different types of financing structures, common mistakes of software companies, the Series A Financing term sheet, liquidation preferences, and anti-dilution provisions.  As bringing on employee talent and contracting are important for scaling companies, we also plan to touch on issues related to employees and contracts.

Emerging Companies Considering Sale

For companies considering a potential sale, we plan to cover common sale transaction structures, how to prepare for a potential company sale, letters of intent, and use of investment bankers.  We also will look at some of the commonly negotiated terms in sale transactions as well as recurring issues that arise during the sale process.

If you have any suggestions on potential topics for us to cover in AlphaTakes, let us know!

By AlphaTech | Permalink | No Comments

 

94labs 2011 Summer Class Launch Event

94labs incubator (formerly Spreenkler incubator) recently showcased the fourteen companies graduating from its summer session. The event was hosted at the Wisconsin Institutes for Discovery and featured the founders of the fourteen companies as well as the five companies emerging from the second-stage accelerator class. Joe Kirgues, Greg Meier, Steve Glynn, Emmanuel Mamalakis and others from 94labs led the event.

In introducing the 94labs incubator to the more than 300 attendees, co-founder Joe Kirgues explained the four main goals for companies going through the incubator: (1) develop a scalable business model, (2) build a software prototype, (3) identify and talk with potential customers, and (4) create an investor presentation. Read the rest of this entry »

By Macy Stoneback | Permalink | No Comments

 

The Confusing World of Joint Ownership of Intellectual Property

A confusing topic for many entrepreneurs is joint ownership of intellectual property.  It often comes up in connection with joint development arrangements, subcontracting portions of work, joint ventures, and other collaborative projects involving intellectual property development, whether it be in connection with software, cleantech, medical device, drug development, or other technology-based initiatives. Read the rest of this entry »

By Matt Storms | Permalink | 5 Comments

 

Who Owns the Rights to Customer Feedback?

Suppose a customer proposes an idea to improve the software or SaaS offering of a company. The company likes the idea so much that it integrates the idea into its next upgrade. The question becomes, who owns the idea that is integrated into the software or SaaS offering?

As a general rule, the person who creates an idea, authored work, invention, or process, owns the related intellectual property.  There are exceptions to the general rule.  But, in the software and SaaS arena involving licensors and licensees, the general rule applies in most circumstances. Read the rest of this entry »

By Matt Storms | Permalink | No Comments

 

Spreenkler Seed Incubator Launch Night

Last night I attended the Spreenkler Launch Night in Milwaukee. What a great event! It marked the culmination of months of hard work by the inaugural class of the Spreenkler seed incubator by showcasing the graduating class of founders. More importantly, it marked the initial concerted effort in the area to use a systematic approach to create, refine, and commercialize multiple software/Internet-based products and services. And probably even more importantly, as evidenced by the event last night, the incubator brought together a community of like-minded people from all parts of the region and ends of the political spectrum who are motivated to work together to create exciting new technology companies in our area.

Here’s some information about the new companies: Read the rest of this entry »

By Matt Storms | Permalink | No Comments

 

Wide Adoption of Electronic Signatures and Electronic Contracts Overdue

While almost a decade has passed since the federal Electronic Signatures in Global and National Commerce Act (ESIGN Act) became law, most companies have yet to take advantage of the opportunities that the act affords. Other than online click-wrap license agreements and Internet sales terms and conditions, most companies are still entering into most of their agreements on paper.  Having moved beyond faxing in most cases, the norm these days for most businesses is to print, sign, scan, and email the contract. In large or important agreements, companies typically also exchange multiple sets of originals, so that each side (and their legal counsel) have original copies. In most situations, this elaborate process is unnecessary.  For a variety of reasons, we often encourage clients to go paperless with their contracts when appropriate. 

Software and Internet Services that Assist with Electronic Contracts

There is some encouraging news that going paperless in the contracting process may become more prevalent.  Adobe recently released a free beta version of its online eSignatures software-as-a-service (SaaS).  The SaaS offering is easy to use and may spur more adoption of e-signature technology.  Low cost competitive products from DocuSign, Arx, and AlphaTrust are also worthy of consideration.  These and other e-signature vendor products offer the following benefits:

  • E-signatures speed up the contracting process.   The extra steps of printing for signature, scanning, preparing a cover letter/fax, and mailing/faxing are removed. 
  • E-signature service can be accessed virtually anywhere.  All that the parties need is a computer with an Internet connection.  No need for the traveling executive to find a printer and scanner/fax or have the hotel staff print the document, prepare a coversheet and fax the signed document back. 
  • Electronic contracting saves paper.  There is no need to print the agreement, so it supports the virtually paperless office, such as ours.

In addition, traditional concerns over security have mostly been allayed.  The e-signature vendors typically offer one or more security measures to authenticate the sender and verify that the document has not changed since it was signed.  Many e-signature vendor offerings are SAS 70 Type II compliant and upload and download over an SSL encrypted channel.  Audit trails show when and by whom documents were sent, viewed, and signed.  After signing and downloading, with most of the products, the party sending the contract typically has the ability to delete the electronic contract from the cloud.

Laws Related to Electronic Contracts

Numerous laws in the United States and abroad recognize the legitimacy of electronic signatures.  The federal ESIGN Act and Uniform Electronic Transactions Act (UETA) serve to establish generally the legal equivalence of electronic records and signatures with paper writings and manually-signed signatures, removing barriers to electronic commerce.  Forty-seven states have adopted the UETA, a model law for states to enact to cover contracts governed by state law; the remaining states, New York, Illinois, and Washington, have each adopted their own statutes governing electronic transactions.  Under the UETA, an electronic signature is attributable to a person if it was the act of the person, which can be shown by the effectiveness of the security procedures for signature authentication and the context and surrounding circumstances at the time of the document’s creation.  No one can be required to use a digital signature or to accept a digital signature.  Besides the United States, the European Union has adopted the Electronic Signature Directive (1999/93/EC) and numerous countries have adopted electronic signature laws.   

How Electronic Signatures Work

These are the basic steps to send a document for signature using an electronic signature solution.  The initiator sets up a password-protected account, uploads a document, types the email addresses of the recipients, composes a short cover note (if desired), clicks to sign (or chooses to sign last), and sends.  Recipients receive an email with the customized message and a link to a document to sign.  Recipients are not required to pay to use the electronic signature service, but they may need to set up an account.  After completing any required authentication checks, they click on the link, review the document, and click to sign and send.  After the document is fully signed, all parties receive an email with a link to the document with digital signature stamps from each signing party.  In the case of Adobe’s eSignatures SaaS offering, Adobe will apply a certifying signature, appearing as a blue ribbon, indicating that the document has not changed since it was signed. 

Additional E-Signature-Based Offerings that Facilitate the Electronic Contracting Process

E-signature vendors with low-cost software or services offer many of the following additional features (some of which Adobe may incorporate into later versions):

  • Signatures in multiple places and on specific lines (whereas Adobe’s eSignatures SaaS offering just appends a signature page to the end with all the electronic signatures)
  • Fill-in-the-blank forms and agreements, guiding receiving parties through the document with signature flags, initial flags, and instructions, and preventing a party from signing a document with an incomplete blank
  • Ability to compare the signed document to the encrypted hash captured at document signing to confirm that the signature is valid and the document has not been modified (whereas Adobe’s blue ribbon indication is immediate)
  • Signing parties other than the sender do not need to subscribe to the service (free)
  • Folders to deliver multiple documents in logical groups
  • Workflow processes for internal approvals
  • Access via mobile devices
  • Optional multi-layered authentication, such as passwords, ID checks administered by third parties with questions from public and private databases, security fobs, etc.
  • Integration with business enterprise software 
  • Server-based as well as hosted solutions
  • Custom branding and instructions 
  • Optional behind-the-scenes digital signature cryptology

Using Digital Signatures for Additional Security

A subset of electronic signatures, digital signatures provide more checks to ensure security, but more time and cost can be involved in administering them.  Digital signature technology can also be used to control who has access to a document or who can sign or certify it.  Digital signature technology is the gold standard of security in terms of validating the authenticity of the signature and preserving the integrity of the document.  This is due to the secure method of locking and unlocking the signatures on the document.  A digital signature, also known as a digital ID, requires a private key of the signer and a public key for the receiving party to validate the signature.  Many large organizations implement a public key infrastructure to issue, authenticate, and revoke digital IDs used for digitally signing documents.  Most receiving parties require that a certificate authority, such as VeriSign or GlobalSign, validate the authenticity of the public key.  There are fees in the hundreds to thousands associated with using a Certificate Authority.  David Youd explains digital signature cryptology in simple terms and pictures (http://www.youdzone.com/signature.html).   While it is not difficult to establish a digital ID or validate another party’s digital IDs, some education and administration is involved. 

When to Use Handwritten Signatures vs. Electronic Signatures on Contracts

Although electronic signatures are in most cases recognized as being equally valid as handwritten signatures, there are occasions when handwritten signatures may be more appropriate.  When doing a substantial deal with a party in a more formalistic country, such as Japan, China, Spain, and Italy, a personal signing ceremony can be a culturally sensitive choice.  Parties might also prefer to sign in person or exchange wet ink signatures when stakes are high or emotions run deep, as with the sale of a business.  In addition, under law, there are certain types of agreements that cannot validly be signed electronically.  For example, in many places, wills, testamentary trusts, family law documents, and U.C.C. documents must be signed by hand.  If in doubt as to whether a contract may validly be signed electronically, check with your attorney first.  Also, government regulators in some highly regulated industries such as pharmaceutical and financial services regard the use of digital signature technology favorably for regulatory and legal compliance. 

Just as signing and emailing documents became prevalent with widespread adoption of PDF files and improvements in scanners, so, too, are electronic signatures likely to become more mainstream as people discover the increasing efficiency and security of e-signature technology.

By Matt Storms and Macy Shubak | Permalink | 2 Comments

 

Effective Contract Management

Effective contract management can save a company time and money and mitigate risk. Even so, often after companies painstakingly negotiate agreements, they frequently file them away and move on to the next business negotiation without giving them much further thought. Getting control of contracts then can become a fire drill after deadlines are forgotten or when a potential strategic partner or acquirer wants to look at a company’s contracts.

Contract management is often ignored or relegated to the backburner due to more pressing daily demands or delegated to someone without the time or ability. Plus, for some companies without relevant expertise or time, it can be daunting to select a contract management solution and integrate the company’s contracts into the management tool. The earlier a company develops discipline in managing its contracts, the earlier it will reap the powerful rewards, including the ability to quickly and easily do the following:

  • anticipate expiration and renewal dates
  • manage its own deliverables
  • monitor third party performance
  • monitor and understand trends within recurring contracts
  • produce custom reports based on unique search criteria

Having a good contract management system may also speed the due diligence process of a significant business transaction, as the contracts will have already been reviewed for completeness, summarized for searching and reporting purposes, and scanned for ready delivery. With more sophisticated contract management systems, not only are executed contracts managed better, but the contracting process on the front end can become more streamlined and efficient and yield higher quality and consistency among contract terms.

Variables to Consider when Selecting the Appropriate Contract Management System

When selecting a contract management system for an organization, it is important to consider both the complexity of the organization’s contracts as well as current and anticipated future needs of the organization. Here are some considerations:

  • How many people are involved in contract administration, and how many people need to have read-only access?
  • Do the users need to have electronic access to the agreements?
  • Do the users need to have access to agreement summaries?
  • Is it desirable for the agreement text to be searchable as well as the summary?
  • Are there certain controls the organization would like to have in limiting access by some people to only certain types of contracts?
  • How comfortable are the users with spreadsheets, databases and vendors’ applications?
  • How many contracts, what types of contracts, and what variations in those contracts does the organization have?
  • What key elements of a contract does the business want to monitor?
  • Are email reminders of key dates needed?
  • How important is it to have a turnkey solution that provides customer relationship management and full contract lifecycle management, including a contracting approval process?
  • Is it desirable to use a hosted solution as a document repository to free up space on the company’s network?
  • What is the budget?

Depending on the company’s current and anticipated needs and desires, the solution may be a simple spreadsheet, a homegrown database, a licensed software application, or a web-based hosted service. Ideally, the solution should be scalable so it can grow with the business, or at least the data should be easily exportable, in case a different contract management system is more appropriate as the business evolves.

Using Spreadsheets for Contract Management

A simple spreadsheet is better than nothing and may suffice if the business has relatively few contracts or many of a similar, simple standard form. The advantages of a spreadsheet are that it is inexpensive and easy to use. A spreadsheet can also be supplemented by scanning the agreements as text searchable PDFs. However, a spreadsheet has limited or no functionality to provide email reminders, tailored permissions by document or category, multiple non-standard contract elements, advanced searches, and various reports.

Using Databases for Contract Management

If the business has an employee or advisor experienced with creating databases, that person could create a tailored database for the business, with specialized contract clause fields, a user-friendly form interface, and customized searches and reports. Vendors’ database products frequently offer greater functionality, such as the following:

  • email reminders
  • tailored permissions
  • customizable fields
  • ability to upload agreements and make them searchable
  • auto extraction of key data
  • sophisticated searches and reports
  • an unlimited hosted document repository
  • customer support
  • military-grade security

Pricing can be surprisingly reasonable. It depends on the sophistication of the software, the number of users, and whether it is a software license with one-time license fee and annual maintenance fees, or a hosted solution with ongoing subscription fees that include customer support.

Designating a Contract Administrator

Equally important as choosing an appropriate contract management tool is designating one or more qualified administrators to assume the contract administration function. The administrator(s) should (1) be able to interpret and summarize legalese, (2) be comfortable with the contract management system selected, and (3) have the time to dedicate to contract administration. Consistency of data entry wording is also important for helping retrieve data through searches of summaries. As the adage goes: Garbage In-Garbage Out! If the business does not have a qualified contract administrator in-house, a corporate paralegal at a law firm can fulfill that role or train someone within the organization to serve in that role.

While implementing effective contract management takes some planning and resources, for most businesses the benefits are well worth it. The earlier a business commits to contract management, the sooner it will begin reaping the rewards.

By Macy Shubak | Permalink | 6 Comments