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Denver Business and Commercial Law Blog

Pointers to help entrepreneurs raise venture capital

In order to become successful, small business owners in Colorado and across the country need capital, but securing it may be difficult. There is some advice available for entrepreneurs who are just starting out and need venture capital to help them reach their business goals.

Since venture capital involves venture capitalists having an active role in the business, entrepreneurs who finance their companies this way must be willing to accept constructive criticism and advice from another person or people with business experience. In fact, entrepreneurs could possibly lose absolute control over their companies' activities and even the directions they take since venture capitalists will only distribute funds as each business goal and milestone is reached.

Using competitive insights to succeed in business

Colorado entrepreneurs in Colorado may be able to learn a lot by watching the activities of other businesses. For example, the new 'basic economy" class that United Airlines has announced may be interesting to analyze. Whether the new budget option helps United Airlines to grow or cannibalizes the airline's higher-priced options is yet to be seen. Whatever happens, it's clear that United Airlines is taking a cue from competitors that have already started to sell cheap, no-frills tickets.

Many business owners view their competitors as their rivals, but this mindset is not always productive. Instead of getting bitter about a competitor's successes and happy about its failures, an entrepreneur can simply learn from what a competitor does. Taking the time to analyze what a company did right or did wrong can lead to competitive insights that are very valuable.

Trademark Trial and Appeal Board clarifies family of marks

Some Colorado businesses want to trademark a family of marks that they have been using in their advertising. In order to better understand what is required to do so, business owners might want to be aware of a case involving Little Caesar's.

The pizza chain was told that its use of repeated words, such as 'Pizza! Pizza!' or 'Deep! Deep!" are not families of marks within trademark law. According to the Trademark Trial and Appeal Board, the chain's repeated use of the terms does not rise to meet the definition of a family of marks. The board outlined what is required for families of marks to reach a level of distinctiveness, however.

Crowdfunding could be a valuable tool for entrepreneurs

Entrepreneurs in Colorado have traditionally found it difficult to compete for venture capital funding with nascent companies located in major business centers like New York, Chicago and Los Angeles, but the growing popularity of crowdfunding could be helping to level the playing field for them, according to a study. Researchers from the University of California, Berkeley and Yale University looked at business startup projects listed on the crowdfunding website Kickstarter, and they discovered that these offerings were often of great interest to venture capital firms.

According to the study, which was published by the online journal Science on Dec. 23, firms that provide seed capital often look to websites like Kickstarter for ideas and to gauge how well a company is likely to perform. The researchers say that when the number of Kickstarter projects being offered in a given area increases by 1 percent, a similar increase in venture capital activity will likely be observed the following year. The researchers focused mainly on technology crowdfunding offers and ignored arts-related opportunities like film projects.

Startup businesses choosing mergers over IPOs

Investors in Colorado and elsewhere in the country are getting fewer chances to put their money into innovative startup businesses as more and more of them are eschewing initial public offerings and instead choosing to be acquired by larger companies. Fewer IPOs were available to investors on American exchanges in 2016 than during any year since the financial crisis, but the number of mergers soared to levels not witnessed in almost a decade.

CNBC reports that $143 was spent on mergers and acquisitions in 2016 for every dollar generated by IPOs. This is the highest ratio of merger-to-IPO spending in about 30 years, according to the network. Both IPOs and acquisitions allow the original investors of successful startups to cash out by either selling their holdings or exchanging them for stock in a larger venture. IPOs accounted for about 70 percent of the money going back to venture capitalists in the early 1990s, but the tide turned abruptly in favor of mergers and acquisitions following the 2000 stock market correction.

A business plan can help with more than just funding

Many Colorado entrepreneurs write business plans in order to attract potential investors for their new ventures. However, business plans are important even to companies that are being funded by their founders. They can help owners by forcing them to make a plan to achieve their business goals.

Most people would not blink an eye if a construction company said that it needed a plan before beginning construction on a home. Failing to plan the building process could result in costly mistakes, unsafe work conditions and a poor outcome. Just like building a house, building a business also requires a well thought out plan. If a business has no blueprint, the owners could make bad purchases, fail to consider market trends and fail to ensure that they are following legal regulations.

How to succeed when starting a business

Potential Colorado entrepreneurs face quite a few issues. From financial and legal matters to hiring and marketing, they can easily feel overwhelmed. Even at the outset, there may be some hurdles.

For example, determining the business name is extremely important. It should be one that is not hard to spell and one that the employees will enjoy saying. An internet search will reveal if the name is in use, and it can be helpful to select a name that will not be limited if the business grows. Once all this is clear, the business owner can create the company's website and start the marketing process.

Nokia sues Apple over several key patents

Many people in Colorado use Apple products for business and personal use. Now, the complex technology that goes into creating many of those devices has become the subject of patent infringement claims. On Dec. 21, Nokia OYJ filed two lawsuits against Apple Inc. over dozens of alleged patent violations. The lawsuits involve technology that is used to create products such as the iPhone, iPod, iPad, Apple Watch and Mac computers.

Nokia claims that Apple agreed to pay licensing fees for Nokia-owned patented inventions. However, Nokia says that Apple has refused to pay Nokia established industry licensing rates even though Apple has continued to use the patented inventions. Some of the inventions that are the subject of the litigation are necessary for high-quality video streaming and radio signal transmitting.

Attracting venture capital for Colorado startups

If you have a good idea for a new business but are unable to secure the seed money to get it off the ground, you might look to angel investors as potential alternatives to traditional business capital funding. Angel investors are often more aggressive than are other investors and often enjoy investing in businesses that are high risk but which offer potentially high returns.

Attracting venture capital requires that you are familiar with the various angel investors who are interested in investing in high-risk ventures. You will also need to write a strong business plan that follows their formatting and requirements.

Business planning for 2017

Many entrepreneurs in Colorado are very busy during the holiday season. Ventures may be booming during the fourth quarter, and there may be a lot of holiday parties and family events to attend. Even during this hectic time, it is important for business owners to assess their goals for the new year.  

A business owner may have goals for 2017 such as increasing profits, launching a new product, hiring more employees or expanding to a new location. Whatever goals an owner has for the coming year, it is important that they take stock of where their business is right now. Looking at the business' current financial picture and assessing how well it met goals that were made last year can help an owner to create a plan and conquer new goals.