Law and business

What is an emerging business?

Dictonary.com defines “emerging” as

1) To come forth into view
2) To come up and arise
3) To rise from an inferior point or position

From my own personal experience as an entrepreneur, emerging businesses face certain issues at certain stages:

1) Emerging businesses that have not yet proved concept

Proof of concept usually occurs during times of minimal revenue realization. It is natural for companies to be too micro focused on realizing revenue with their product or service to address the structural/process (e.g. contracts and licenses), employment (trade secret agreements, employment contracts, non-compete agreements) and intellectual property strategies (patents, trademarks, copyright) related to their product and service. On the other side of the coin, it is natural for emerging businesses to focus on the big picture without focusing on the details that will protect the founder in growth and ultimate exit.

2) Emerging businesses at market

My experience is that CEOS of emerging business are usually occupied by the holy trinity of a) trying to make the business was cash flow positive, b) securing enough cash for the balance sheet, and c) focusing on bottom line P&L growth/profitability. If this is not enough, business leader also needs to focus on: hiring and managing sales people, drafting and managing a marketing plan/strategy, growing and training an operations team, creating and implementing a product/services plan, and assuring that the business was compliant with the plethora of laws and regulations. This leaves very little time to strategically focus on profitable business structure, governance, liability control and intellectual property protection, which all individually may have a huge impact on company success or failure.

3) Emerging businesses exiting

One very obvious way to create value to equity participants is to merge or be acquired by another company. This almost always will be preceded by due diligence. Due diligence is defined as “research and analysis of a company or organization done in preparation for a business transaction.” I have had the opportunity to be subject to due diligence both when a company I led was contemplated by a Fortune 500 company for acquisition, as well as when a group of investors invested. Suffice to say, no stone will go unturned and any issues provide a compelling case for lesser valuation or not completing the deal. Accordingly, if exiting your business is part of an emerging business strategy, they need to protect and document their structural and intellectual property assets at all stages.

4) Emerging businesses in distress

Emerging businesses do not only experience positive growth. In fact, businesses have emerged from bankruptcy and others have needed to fight off hostile takeovers or undergo recapitalization. Others miss their numbers either quarter by quarter or year by year. This does not make these businesses any less emerging. However, it will require even greater focus on planning and protecting the assets of that business.

We have experience with the legal and business issues apparent for all emerging companies, and are available to help you grow your emerging business in a cost effective manner.