Do you want control? Or do you want to win? It’s a decision many entrepreneurs have to make early on, and the answer often determines what problems startups will have down the road, said Fahd Riaz, a partner at the law firm DLA Piper.
Riaz is one of four panelists taking the stage at MedCity CONVERGE on Sept. 1-2 in Philadelphia, on a panel titled, “The Modern Entrepreneur’s Dilemma: Protecting What’s Yours.”
The panel features entrepreneurs, accelerators leaders and service providers sharing how startups can mitigate risk in an era when they have more options than ever.
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Riaz shared some of his ideas ahead of the conference, and an excerpt of that conversation is below.
Q: When is comes to managing a business, what gets an entrepreneur off on the right foot?
An entrepreneur should have a very practical viewpoint of the world. They need to sit down and think about what their long-term objective is. If they haven’t, they get stuck and become vulnerable.
A good example is if you think your objective is to grow a good company and viable business. That’s one objective versus, “I am a control freak and I don’t want to give up control.”
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Looking at that from an investment point of view, what is your objective? To grow a business or master a kingdom? You have to balance the two. Not balancing it the right way will make you a master of nothing.
Think through what you are trying to accomplish: long-term versus mid-term. Not from an entrepreneurship perspective but from a business perspective.
Q: How should that philosophy guide you when you’re looking at a new investor, licensing deal or strategic partner?
I think you have to fundamentally balance the vision of your business. How do you give up control while still maintaining your vision? You will give up some control. But you need not give it up completely so you can manage long-term objectives.
There are all sorts of mechanisms for this – whether it’s board seats, whether it’s restrictive covenant or it’s negative covenants. Giving up ownership control doesn’t mean you give up how key business decisions are made.
Q: There are bad deals and good deals, though. How can you avoid them?
Some people say, “I need a contract with X.” But they don’t think through the long-term picture: you might have given everything away.
It’s not about immediate gratification. Don’t think about it in terms of, “I just need a contract.” Think of what the implications of that contract will be long-term.
Q: How does that extend to deal over your intellectual property?
Maximize the value in a partnering deal while maintaining control – and not giving away the crown jewels without getting a return on investment.
Q:It sounds like you have to future-proof yourself. Is that accurate?
I think the key here – and we often see this – is a young entrepreneur saying: “Just get the thing done.”
Your deals will have long-term ramifications. A contract should not do you harm. Ask yourself: Is this relationship looked at in a long-term perspective based off long-term objectives? Or will it do me harm?
