Memphis-based startups are reaping the benefits of a statewide effort to increase the flow of capital to innovative companies in the early stages of development, says Matt Heiter, an attorney and shareholder with Baker, Donelson, Bearman, Caldwell & Berkowitz PC in Memphis.
Now in its third year, the TNInvestco Program in 2010 allocated $200 million in tax credits to venture funds with experience in developing new companies. The funds sell the tax credits to insurance companies, which in turn purchase the credits with capital reserves. The venture funds use that extra capital to help Tennessee-based companies grow.
Heiter, who specializes in providing counsel to emerging companies, says the legislation has created opportunities for firms like Baker Donelson to lend its expertise to help Memphis-based startups find funding and avoid common legal pitfalls.
That’s the focus of a free event, the Southeastern Emerging Companies Boot Camp Series, the law firm is hosting on Tuesday, July 16, at Baker Donelson’s office at 165 Madison Ave., Suite 2000. The boot camp will bring together entrepreneurs, capital investors, and legal and accounting professionals to provide guidance on business, tax and legal issues faced by emerging companies across all industries.
“The boot camp is agnostic as to industry,” Heiter said. “When they leave the event, they will have a general working understanding of the legal issues they will face in launching a company.”
This year, Heiter will speak on the effective use of corporate counsel and emerging trends in crowd funding. Other experts also will address contract basics, corporation formation, labor and employment law, accounting and record keeping, intellectual property, branding, and the use of term sheets.
In 2010, Congress under the Small Business Jobs Act, directed the U.S. Securities and Exchange Commission to develop guidelines that will allow startups to issue securities on crowd funding sites like Kickstarter. While companies can currently offer investors advance copies of a film or product in exchange for funding, they can’t yet issue securities, Heiter said.
Heiter says the SEC has dragged its heels in developing the new guidance.
“They are concerned about fraud implications. This is something they are pouring over to, quite frankly, make it effective but to keep the fraudsters out,” he said. “The concern is that if there is too much fraud, it will deter investors and won’t have the ultimate result they are hoping for in the market.”
Companies from the city’s accelerator program community will be attending, including the six companies participating in the ZeroTo510 business accelerator program and the four female-led startups in Upstart Memphis.
“There’s a lot of trial and error involved in launching any startup,” Heiter said. “A lot of times first-timers fail, not because they had a bad idea, but because they didn’t know how to plan.”
The boot camp is a good fit for entrepreneurs that are just beginning the process as well as medium-sized companies that don’t have access to in-house corporate counsel, he said.
“We want to give them a nurturing environment where they can reassess their objectives,” Heiter said. “It’s a lot easier to do it early on than when you have investors on the line.”