LQ: Legal Consulting
Program Targets Startups

June 1, 2007
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Over the last few years, Dykema Gossett has seen a big surge in interest in its Emerging Business and Technology program, particularly among young biotech and life sciences companies.

The firm’s Emerging Business and Technology program offers startups a suite of basic consultation services for $7,500 annually. Dykema Gossett specifically designed the program for startup companies that are somewhere between initial concept and the infusion of venture or growth capital, and have current annual sales of less than $1 million.

When the firm introduced the EBT program 10 years ago, it was targeted to dot-com companies, said Jin-Kyu Koh, a corporate attorney and co-leader of Dykema’s biotech practice group. At the time, some law firms, particularly on the East and West coasts, were taking equity positions in dot-coms, he recalled. The firm did not feel comfortable with that but still wanted to invest in those types of companies, so it devised the EBT program as a form of “investment” in them.

Since the dot-com bust, the EBT program has served emerging technology, life sciences, biotech, software, e-commerce and service-related businesses, among other kinds of startups, and Koh said his firm has developed a good sense of what young companies need early on.

Two of the problems emerging companies tend to have, he said, are a limited amount of cash and lack of experience with lawyers. That becomes a double whammy of sorts because a young company may resist calling a lawyer — not just because they’re inexperienced with lawyers, but because every time they phone a lawyer, it’s money out the door, Koh explained.

The EBT program includes: legal review of the client’s business plan; consultation on a company’s legal organization; financing sources; tax structuring and planning; intellectual property protection; and preparation of shareholder or buy/sell agreements, employment and consulting contracts, confidentiality and proprietary information agreements, and sales or licensing agreements.

“It’s a loss-leader for us, but there is a longer-term interest on our part: When these companies mature in their lifecycle, hopefully they’ll stick with us,” Koh said, noting that, on average, the firm serves about 10 new companies a year with the program.

Lawyers from all of the firm’s various practice groups provide legal services to clients in the EBT program.

Dykema has had very good success with EBT, noted Dykema attorney Jennifer Bakhuysen. She said the point is to show young companies the quality of legal services the firm can provide, so when they grow larger, they’ll feel confident in Dykema’s abilities and what it can do for them.

Bakhuysen said that, initially, start-ups need help with all the documentation and filings that have to be done to put their organizational structures in place. There is also a host of issues that crop up as firms set up operations — everything from employment issues to real estate issues.

Under EBT, new companies have access to various Dykema departments for initial consulting, and there is no cap on the number of consultations a company can have within the one-year period.

A consultation is a bit different than doing some sort of filing, Bakhuysen said. If there is an immigration issue, for instance, Dykema will give general advice on immigration, but if something actually has to be filed with the immigration office, the basic fees and rates would apply.

“In the process of doing the consultation, they could evaluate whether it was something that is necessary and (something) they wanted to do at that point, and then decide whether they want to pay the additional fees,” she explained.

Clearly, the trend in the Grand Rapids area and in West Michigan in general is in life sciences and biomedical fields, and West Michigan’s SmartZones are contributing to the synergy, Bakhuysen said.     LQX

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