Pictured Above: (From left to right) Beth Cohen, Chris McDemus, Chris Yaracs (LAW ’15), Carolyn Allwin, John Devine, Chuck Carter.
Is starting a new business “show business”—or just business? And, either way, what role does law play here?
These were the leading questions asked and answered by six experts on Philadelphia’s startup scene, who met Tuesday, March 13, 2018, to rate mock pitches by students in Lawyering for Entrepreneurship (LE), the startup simulation course taught at Temple Law by Professor Jonathan Lipson and attorney Matt Devine (LAW ’16).
LE asks students to role-play the parts of founders and investors (and their lawyers) typically involved in the early stages of a company. The course is designed to help students develop a feel for the legal aspects of developing a company, as well as the business and interpersonal challenges involved.
At the start of the semester, students come up with a new business idea, which they present in short “elevator pitches” to the class. The students vote on one another’s presentations, with the three winners becoming the “founders” of the companies they pitched. They are joined by the top three runners up, who each join one of the three companies as the company’s “co-founder.” The students then navigate the process of leaving their former employers and incorporating the business, before seeking to close two rounds of investment and ultimately selling the business to a larger international corporation. Along the way, students have the opportunity to learn about and interact with some of the key legal and business considerations of starting a company.
At the March 13th event, the founders presented business plans for their mock companies in the hopes of “raising” $250,000 from the panelists, who played the roles of angel (early stage) investors. The challenge: only two of the three teams could receive funding. Thus, the panelists would have to decide which company would be “thrown off the island.” Along the way, the panelists provided feedback to the students on their presentations, and discussed startups—and lawyering for them—in Philadelphia generally.
Chuck Carter, President of the Philadelphia Chapter of the Keiretsu Forum (an international network of angel investors that has invested nearly $1 billion since its founding in 2000), reminded students that investors are looking for more than just a good idea. He described startup pitches as a kind of “show business,” noting that ultimately, investors look for the right founders at the helm of a new company, as well as enough opportunity for growth in the company to benefit the investors in the future. As a former intellectual property lawyer himself, as well as a serial entrepreneur, Mr. Carter was able to bring his decades of experience to show students exactly what it is like to ask for money from real investors.
The panelists also discussed the role of legal education in this context, and agreed that law school can provide a valuable analytical framework. But Chris McDemus, Managing Partner at Baer Crossey McDemus, a leading Philadelphia-area startup boutique firm, also emphasized the importance of gaining business experience outside of a law firm. Drawing upon his own experience as in-house counsel to a number of successful national and international businesses, he noted that lawyers who have worked on the business side can better understand and advise their clients by understanding the relevant market and recognizing important business considerations that legal experience alone does not always teach.
Carolyn Allwin, a serial entrepreneur and impact investor, agreed that a law school education is a great tool to have in the business world. However, she too said she gained valuable experience working for a hedge fund after working for a larger firm, before parlaying both experiences and an MBA from the Wharton School of Business to found several of her own companies, including the social impact consulting firm Elysian Advisers. She explained that such experience can help lawyers learn to provide a much-needed business context to frame and inform their legal advice to clients.
John Devine, of counsel at Ballard Spahr, explained that, especially in the beginning stages of a company, it is critical for their lawyers to help predict problems and adjust quickly. This is particularly true for clients in health care and life sciences practice, which is important in Philadelphia, because clients have to deal with complex regulatory regimes while still developing a product that is responsive to feedback from actual patients. Thus, he reminded students, there are many different ways a company can fail and lawyers can really add value by knowing the industries they practice in and proactively guiding companies around known problem areas. He advised students that when they do experience a failure with a client, they should use those failures as a learning tool, and a way to offer more constructive solutions to clients in the future.
Chris Yaracs (LAW’15), an associate at Royer Cooper Cohen Braunfeld LLC, noted the parallels between being an entrepreneur and being a young attorney attempting to build your own startup practice. In his view, “being a lawyer is your own business” and lawyers must learn to refine and sell their skills and experience to clients, firms, and the like. He noted that “there is no better training to be an entrepreneur than going to law school.”
Panelists also discussed the local startup scene, with many of the panelists agreeing that Philadelphia has a robust and growing startup scene. Still, the prevailing sentiment was that the biggest barrier to Philadelphia joining the ranks of other major startup hubs such as those in Boston, New York, and San Francisco, was Philadelphia’s relative lack of large institutional venture funds and incentives for investors. However, Beth Cohen, Director of Business Strategy & Innovation at Royer Cooper Cohen Braunfeld, added that Philadelphia was particularly strong in business-to-business transactions, a potential advantage over other locations with a more direct business-to-consumer focus.
Ultimately, the panel of experts heard three different student pitches: an online platform for buying personalized greeting cards, a company developing technology to use body heat as a power source for medical devices, and, finally, a company that would develop and install package delivery lockers outside of residential homes. The first two, led by “founders” Brian Thomas and Dean Krebs, respectively, won funding that would take them to the next “stage” of their business. Meanwhile, students from the package delivery locker company will be assigned to play new roles in the on-going simulation for the balance of the semester.
Allison Callahan (LAW ’18) is a 2015 graduate of Wake Forest University. Following graduation from Temple Law, Allison plans to work at Ernst & Young in the Fraud Investigation and Dispute Services Practice.