We regularly serve as legal partners to inventors, entrepreneurs, and startups so we were excited by the new CNBC show Make Me a Millionaire Inventor starring engineers Deanne Bell and George Zaidan. The show did not disappoint and, along with new show West Texas Investors Club and the perennial hits Shark Tank, The Profit and Consumed: The Real Restaurant Business, CNBC is must watch television.
First and foremost, the hosts Deanne Bell and George Zaidan are not only extremely bright and qualified engineers, but they also proved to be fantastic in front of a camera. We work with quality invention consultants, such as the Prototype House in South Florida, and we felt Ms. Bell and Mr. Zaidan were superb engineering consultants for the FitGuard and Marinara Tower entrepreneurs depicted on the first episode. Additionally, L.A.-based Bluefish Concepts, the company used by Ms. Bell and Mr. Zaidan to assist the entrepreneurs with the prototypes, also appears to us to be the right mix of engineers and personalities for entrepreneurs who are looking to design and build a prototype on the West Coast.
Episode 1 entitled “Failure to Launch,” featured two inventions: the Marinara Tower and the FitGuard.
The Marinara Tower is a marina sauce chocolate fountain. Samantha, the inventor of the Marinara Tower, was presented with an offer from investor Steve Viscusi who requested 51% ownership and control of the company. We reached out to Mr. Viscusi via Twitter at @WorkplaceGuru who said he offered Samantha “over $200,000” and was “bewildered” she didn’t take it. While we admire Samantha’s unwillingness to cede control of her invention, we too were somewhat bewildered at the rejection and would probably have advised her to take the deal and move on to another idea. Samantha probably should have jumped at the chance to reduce or eliminate the debt to develop the invention, keep a strong stake in the profitability of the invention, and give control of the invention to a proven businessperson in Mr. Viscusi. It sounded like a good deal based on our experience from what information we were provided on the show.
The FitGuard was pitched as a “smart” mouthguard that lights up when concussion-force impact is made with a person wearing the mouthpiece. We think Ms. Bell was probably the catalyst for getting the deal done as the investors did not initially seemed concerned that the product would not be first to market. That said, the idea of a mouthguard which can detect concussions is a very good one and could change the game for youth contact sports. Because of the early stage of development of the product, the FitGuard entrepreneurs took a smaller deal than originally pitched to get the product to market quickly with their investors.
As legal counsel to inventors and entrepreneurs also referred to as “startup lawyers,” we have collectively seen a wide variety of business, franchise and product ideas presented to us over the years. While there are many topics we discuss with inventors and entrepreneur clients in our free consultations, we offer three “high-altitude” pieces of advice to inventor entrepreneurs that we believe are critical to success:
1. Do Your Homework
If you have an idea, do your homework first. Before you spend countless hours and hard-earned dollars on your invention, search the United States Patent & Trade Office (USPTO) website database for trademarks and patents, use Google exhaustively, talk to close friends/family about the idea, and reach out to a startup lawyer who will offer you a free consultation. Your idea should be held close to the vest but not to a fault. To be ultra-cautious, we recommend that our inventor clients have a non-disclosure agreement signed before discussing the idea with others.
2. Choose the Right Advisors
You know your strengths. Seek out advisors for your product or business which complement you. If you are a strong sales person but not very good with numbers, associate with an accountant or bookkeeper. Oftentimes, a startup lawyer can fill many gaps for entrepreneurs and inventors with providing corporate structure, implementing corporate governance, obtaining office space, preparing necessary contracts, negotiating with investors, preparing term sheets, providing employment law counsel, offering franchising advice (if applicable) and aiding in getting deals done. When searching for your key advisors, make sure to ask a lot of questions to ensure that the advisor can make up for one or more of your weaknesses.
3. Say Yes to an Operating Agreement
Too often, friends or family members will team up on a business venture who don’t think they need an operating agreement. We talk to these prospective entrepreneur clients about operating agreements, and they oftentimes treat it as if we are discussing the taboo subject of a “pre-nup” before a marriage. Other times, the prospective client will make the (penny-wise, pound foolish) decision that the nominal fee to prepare an operating agreement just isn’t worth it. As litigators of shareholder disputes, a/k/a business divorces, we can tell you that not having an Operating Agreement can cost you thousands in lawyer fees. Talk to a startup lawyer, get a good price on an operating agreement, and stash it away while you concentrate on building your business and/or developing your product.
For more specific legal advice about your idea or business plan, please contact our firm attorneys. We also encourage our readers to check out Make Me a Millionaire Inventor on demand and catch up with Ms. Bell and Mr. Zaidan on Wednesday next week on CNBC .
About Wasch Raines LLP
Wasch Raines LLP is a business and franchise law firm providing a comprehensive range of services to emerging and established businesses and franchise companies in a variety of industries. Through its unique business model, the firm offers its clients the benefits of having a cost-efficient in-house general counsel and a full service litigation team. For more information, click here to contact us, email info@waschraines.com, or call (561) 693-3221. View attorney profiles and read our blog on our website at waschraines.com.
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