Legal Insights for Entrepreneurs: Building Your Board of Directors

The following post is first in a several part series designed to help entrepreneurs navigate the sometimes turbulent waters of starting and managing new ventures. These tips come from Will Joyner, an attorney specializing in general business and corporate law with an interest in emerging growth and technology companies.

Our entrepreneur clients often ask for advice about the ideal composition of their Board of Directors. A Board of Directors (often called a “Board of Managers” in an LLC) has the ultimate authority for managing a company’s business; therefore, its members should be selected with care. While every case is different, there are a few basic principles that entrepreneurs should consider as they put together a Board of Directors for their start-up or early-stage company:

● Endeavor to maintain a Board with an odd number of directors: e.g., 1, 3, 5 or 7. This eliminates the possibility of the Board being deadlocked when voting on a key issue. Deadlock at the Board level can cripple a company, causing it to be mired in legal issues before it has a chance to succeed.

● Keep the Board as small and nimble as possible during the early stages of the company’s lifecycle. In some cases, this might mean a 1-person Board with the founder being the sole director. As the company grows, investors and other key stakeholders will likely seek representation on the Board; however, this should be a natural evolution and there is usually no need to rush this process.

● When outside investors require representation on the Board, one or more of your initial Board members may be asked to resign. It is usually advisable to make your initial Board members aware of this possibility up front, rather than waiting until their resignation from the Board is requested by investors.

● Think twice about placing your key employees on the Board. If you decide later that the employment of a key employee should be terminated (e.g., for lack of performance), it usually complicates the process if that key employee is also a Board member.

● Be careful not to confuse the role of an informal Advisory Board with the primary governance role of the Board of Directors. Having affiliations with experienced business and community leaders can be a great resource for an entrepreneur, and can also lend credibility to a new venture. However, it is usually best for these individuals to serve on an informal Advisory Board without any formal governance or fiduciary responsibilities.

submitted by Will Joyner
Kilpatrick Townsend & Stockton LLP

UNCSA dean produces Smurfs movie

In November 2008, the Winston-Salem Chamber of Commerce Tech Council Speaker Series presented "Center Stage with Jordan Kerner: The Future of Filmmaking." The then-new Dean of the School of Filmmaking at the University of North Carolina School of the Arts wowed us with his passion for film, how he planned to infuse that passion into his students, and how he was going to maintain his connection to producing movies while performing as Dean. That commitment to producing and to his budding filmmakers has resulted in the release of his latest film, The Smurfs. UNCSA film students benefitted by having the opportunity to work on a major Hollywood movie! Read all about it here!

Major nanotech commercialization conference brings global attention to NC

The annual Commercialization of Micro-Nano Systems Conference (COMS 2011) is being held Aug 28-31 in Greensboro. It has shaped up to be a who’s who of the micro-nano technology community, bringing together leaders in North Carolina with those from around the globe. Plenary Speakers include: Anthony Atala, MD; Joseph M. DeSimone, PhD; and Paul M. Zavracky, PhD.

North Carolina is already a top player in nanotechnology, ranked fourth behind only Silicon Valley, Boston, and Houston. It is poised to become one of the major centers in the field, according to industry experts. Landing the COMS event for the state is a significant step. More.

Wake Forest Baptist among "most connected" hospitals

Coupled with U.S. News & World Report's annual hospital rankings released Tuesday was a list noting the "most connected hospitals" in the country — an addition to the publication's annual scoring and ranking of medical centers. Given the increasing emphasis on electronic medical records at the physician and health system levels, it's a natural addition to the rankings U.S. News & World Report compiles each year.

It's worth noting that only one hospital in the Triad — in fact, only one hospital in the state — was named to the list, and that was Wake Forest Baptist Health. The Winston-Salem-based health system was among the 118 hospitals on the "most connected" list. More.

Nominate YOUR Innovation for Cook Medical Innovation Award!

Do you have an innovative product, service, concept or procedure? The third annual Cook Medical Innovation Award, presented by Cook Medical in partnership with the Chamber, recognizes outstanding locally-developed and novel technologies. Submit your ideas by August 15. The winner will be recognized at the Chamber’s Annual Meeting luncheon on November 30 and presented a unique award designed by a local artist. Click here for details and nomination form.

Are YOU an investor-ready entrepreneur?

Raising equity capital is challenging at best. Becoming an Investor-Ready Entrepreneur is designed to educate and prepare growth-oriented entrepreneurs to successfully engage private equity investors. Getting ready includes a wide range of activities and decisions that will help the entrepreneur with their business in a number of ways. The program was developed with direct input from experienced entrepreneurs, angel investors, angel networks/fund executives, and venture capitalists, and provides an "insider's look" into the world of equity funding. By understanding what investors look for, entrepreneurs can reduce barriers to funding, navigate the process more easily, and increase the chances of obtaining funding for their business.

The program will be held in Winston-Salem on August 2, 8:00 AM - 5:30 PM, at Worrell Center, Wake Forest University. Registration is $295; however, a special scholarship rate of $95 is available courtesy of state and local sponsors. Space is limited, so registrations are on a first come, first served basis. More information and registration here.

Triad Forensics Laboratory Graduates from PTRP incubator

Triad Forensics Laboratory, a company that provides services such as forensics, environmental and product testing, is graduating from the Wet Lab LaunchPad incubator in the Piedmont Triad Research Park into a new location on Northgate Park Drive.

The move will allow the company to pursue new contracts and business opportunities that require a greater degree of security and privacy than was possible in the incubator, according to CEO Lauren Stainback. More.

Legal Insights for Entrpreneurs: Building Your Board of Directors

The following post is first in a several part series designed to help entrepreneurs navigate the sometimes turbulent waters of starting and managing new ventures. These tips come from Will Joyner, an attorney specializing in general business and corporate law with an interest in emerging growth and technology companies.

Our entrepreneur clients often ask for advice about the ideal composition of their Board of Directors. A Board of Directors (often called a “Board of Managers” in an LLC) has the ultimate authority for managing a company’s business; therefore, its members should be selected with care. While every case is different, there are a few basic principles that entrepreneurs should consider as they put together a Board of Directors for their start-up or early-stage company:

● Endeavor to maintain a Board with an odd number of directors: e.g., 1, 3, 5 or 7. This eliminates the possibility of the Board being deadlocked when voting on a key issue. Deadlock at the Board level can cripple a company, causing it to be mired in legal issues before it has a chance to succeed.

● Keep the Board as small and nimble as possible during the early stages of the company’s lifecycle. In some cases, this might mean a 1-person Board with the founder being the sole director. As the company grows, investors and other key stakeholders will likely seek representation on the Board; however, this should be a natural evolution and there is usually no need to rush this process.

● When outside investors require representation on the Board, one or more of your initial Board members may be asked to resign. It is usually advisable to make your initial Board members aware of this possibility up front, rather than waiting until their resignation from the Board is requested by investors.

● Think twice about placing your key employees on the Board. If you decide later that the employment of a key employee should be terminated (e.g., for lack of performance), it usually complicates the process if that key employee is also a Board member.

● Be careful not to confuse the role of an informal Advisory Board with the primary governance role of the Board of Directors. Having affiliations with experienced business and community leaders can be a great resource for an entrepreneur, and can also lend credibility to a new venture. However, it is usually best for these individuals to serve on an informal Advisory Board without any formal governance or fiduciary responsibilities.

submitted by Will Joyner
Kilpatrick Townsend & Stockton LLP

5 Minutes with Piedmont Triad Research Park President Doug Edgeton

I had the good fortune to be able to sit down with Doug Edgeton, President of the Piedmont Triad Research Park, for a few minutes last week. With a backdrop of the PTRP construction, we talked a little about the PTRP expansion project, and about Doug himself:

Q Tell us about your role at the Piedmont Triad Research Park.

A I get the privilege of serving as the President of the Piedmont Triad Research Park. It's a large-scale development in downtown Winston-Salem being led by the Wake Forest Baptist Medical Center. We've taken on that charge to create space, not only for us, but for the entire community. PTRP is a benefit Winston-Salem, Forsyth County, and the Triad. We hope to be substantially completed by 2023.

Q What do you enjoy most about your job?

A The wonderful opportunity to see and interact with all of these small businesses and to work through this development. I've learned so much about things I never would have guessed that I would ever need to know about--pollutants in the ground, new technology for removing pollutants in the ground, etc.. I've really earned a great education throughout the whole process.

Q Speaking of education, does what you're doing today relate to what you studied in school?

A I have an undergraduate degree in Hospital Administration, a Masters in Public Health, and a Masters in Business Administration. This does relate very much to the business component, but not so much the masters in public health, at least not to date.

Q How did you get to where you are today? Did you have a mentor or some other inspiration?

A This ties together very much with growing the Medical School. I'm the Chief Business Officer for the Medical School. What we've been looking for is a way to increase the size and scope of the Medical School. In order to do that, we needed space to accommodate that growth. As we started looking for opportunities to create space for the Research Enterprise, we realized we needed a large enough footprint for 150 years and that's how we started acquiring property downtown.

When we began acquiring property and developed a Master Plan, Reynolds American approached us and said, would you like to include these abandoned factories in this project, because we think it's very exciting and could transform the community. So as we started down that path, I had many mentors, and many people advised me on how to make this become a reality.

Q How did you come to Winston-Salem and end up doing what you're doing?

A I was at the University of Alabama at Birmingham at the University of Alabama School of Medicine for 20 years before coming to Winston in 2000. I was recruited up here as the Principal Business Officer and Vice President for Wake Forest Health Sciences.

Q What do you do when you're not running the PTRP?

A I enjoy spending time with my kids, who are growing up fast and my wife. I spend a fair amount of time doing things in Winston-Salem.

Q What advice would you give to young people who would like to do what you're doing?

A Fortunately I do get a chance to mentor students at Wake Forest frequently. My advice to them is if you are going to try to do the research park part, there are different stages as you look around the country. We're in the Early Development stage so this is more real estate, real estate law, orientation toward some company recruitment. As you get into the more mature park, it's more about company recruitment and retention. My advice generally is to gain as much experience as you can with the commercial real estate world and know a lot about what it takes to make science commercially viable because that's going to be what happens in most parks.

Q What do you expect to be doing in 10 years?

A I hope to be finishing up Phase 2 of the Research Park and continuing to work at Wake Forest Baptist Health and the Wake Forest University School of Medicine.

Q What was your first job?

A The first one I got paid for, other than mowing grass and things like that, was as the Cash Manager. I sat in a room that was a former elevator shaft and I had safes that had alarms all around me. I counted money and managed a large cash operation at the University of Alabama.

Q Where is your favorite place to vacation?

A We like to go to Key West. That's been a favorite spot of my kids since we attended a meeting down there. As they've grown up we've continued to go back fairly regularly.

Q If you could pick anyone, which 5 people would you invite to a dinner party, living or dead?

A It would be a mixture of really interesting people. Paul McCartney--he's really cool. I would love to sit down with Bill Clinton and talk to him for a while. It wouldn't be bad to have George Bush there to get the other side of that coin. If you could really go back, I'd like to talk to Abraham Lincoln and Thomas Jefferson.