VC funds are shrinking, but there is still hope for you.

The amount of venture capital financing raised is lower than it has been in years, which of course makes the market more competitive for would be portfolio companies hoping for a slice of that pie.  But how can you improve your chances? A new article in the Wall Street Journal proffers some thoughts on what VCs are looking for and what turns them off.  The key is to present a clear, concise, and realistic plan.  It is surprising how easy it is to overlook these simple concepts, but sticking to the facts will at least give you a shot in this market.

While we are talking about getting the most from your meeting with your VC of choice, keep in mind a couple of other tips to avoid failure:

1. Think carefullly about that NDA.  One thing to understand about the people in the VC community is that they are looking at plans constantly to find new investments.  You will see many VCs who say they won't sign NDAs because it is not practical (and you might hurt their feelings).  This does not mean they won't - there may be times when a NDA is appropriate - but think about how you want to start off your relationship and whether a NDA is truly necessary.
2. Know your VC.  Your meeting will be short.  You need to spend the time you have getting your idea across.  Do your homework on the VCs that you meet.  These days, VCs are all over the Internets telling the masses everything that pops into their heads.  Check out Venture Maven or some VC blogs to see what I mean.  Before you walk into the meeting, you should already know what interests - and does not interest - them (and maybe even what they were up to last weekend).  Personalize your approach and don't waste precious time in the meeting discussing things that should have been part of your homework.
3. Bring concrete and realistic ideas.  VCs do not have patience for your bad assumptions or, worse, your ego making irrational and inflated claims.  There will already be enough egos in the room.  You have to generate excitement but you also have to show how your idea is the solution to a problem and, more importantly, how it is realistically going to make money.

Will new gTLDs make the Internet too confusing?

Do you remember when the Internet took off in the 1990s and you could find a company simply by adding ".com" to the name and  - voila! - there was the Web site.  That worked well until all of the common names or phrases were taken because every business, organization, charity, or individual was lumped together in the same place.  Then came ".org" and ".biz" and other extensions, each of which is called a "generic top level domain" (or gTLD), to try to bring some order to the Internet universe.  You had to separately register you name on each of those with ".info" and ".net" and then link them together with a redirect.  Ah, how simple the world was back then. Indeed, while most people do not think much past the basics "open" gTLDs that we have used for the past 10 years, ICANN has rolled out the likes of ".mobi" for mobile devices, ".aero" for the aerospace industry, ".travel" for the travel industry, ".jobs" for companies to post openings, and several others.

Now, the Internet Corporation for Assigned Names and Numbers (ICANN), the group that is in charge of controlling how Internet addresses are handled, is pushing through with a new plan to allow literally hundreds of new top level domains starting early next year.  This would allow for some more specific "community" gTLDs like ".boston" or ".sports" or even individualized company-specific names like ".redsox" or ".dunkindonuts".  Since the naming convention will any string of between 3 and 63 characters, which will now include characters from other languages, there could be millions of possibilities.

What does this mean for trademark owners who have been diligently protecting their name through the various iterations of gTLDs that have come out over the past decade?  It is hard to tell at this point.  There will be some protections for trademark owners, but this may mark the end of the now commonplace occurrence of business owners buying their name in each domain - that just might not be possible anymore.  That is why many companies were critical of the new plan when it was announced last year.

There certainly will be more to come on this in the next several months.  Trademark owners in particular will want to investigate whether a company-specific gTLD makes sense for their business, and I am sure that multinational corporations like IBM and Coca Cola will shell out the $185,000 fee currently proposed for new applications.  There is clearly a need to clean up the conventions of finding information on the Web.  But I would expect that ".com" addresses will continue to be required minimums, particularly for small businesses, while there will be more experimentation with the new names for some time to come.

Where should you incorporate your business?

I was involved in a discussion today with an entrepreneur who was planning to incorporate his business but was wondering where to do it. He is located in California and was asking whether he should stay there or incorporate somewhere like Delaware or Nevada. I have written before about the whether or not you want to incorporate, but the location of your incorporation is another discussion you should have with your attorney. You can choose to incorporate your business in any state, though you will typically want to file in your home state (the state where your operations are located) unless you have a compelling reason to choose elsewhere. Filing in a different state does not excuse you from the filing requirements and corporate taxes of your home state. If you are located in California, you are going to have to pay California taxes and fees either as a domestic California corporation or as a "foreign corporation", which is a corporation filed in another state.  In addition, you will likely have to pay for a registered agent in the state you choose if you do not have an office there.  So choosing another state because it has lower fees doesn't necessarily work.

There are many companies that choose to incorporate in Delaware even though almost none of them are actually based there. In fact, approximately 60% of the Forture 500 companies are incorporated in Delaware. There are two main reasons for this: (1) the Delaware corporate laws are generally favorable to management, and (2) Delaware has created a special Court of Chancery whose jurisdiction is to hear nothing but business law cases. See, in other states, your business case could be heard by the same judge who just heard a criminal matter, or a domestic dispute, or an environmental action. The Delaware Court of Chancery's focus on corporate law provides a certain amount of predictability and consistency that you may or may not find in other states.  However, many large and small companies will choose for a variety of reasons to incorporate in their home state (for example, even large tech companies such as Apple Inc. and Microsoft Corporation are incorporated in California and Washington respectively).

Nevada is also mentioned on occasion, primarily because it has liberal rules with respect to privacy, very pro-business laws, and a beneficial tax policy (read: no corporate, franchise, or income taxes). It has also developed a court similar to Delaware's, but because it has not been around nearly as much, it has much less established case law.  New York is a state that is often used as the governing state law in commercial transactions, but getting through the incorporation process there can be onerous.  And some states have laws that you might prefer to do without.  California, for example, has a very strict policy of not enforcing non-competition agreements other than in connection with the sale of a business.

Again, you should consult with an attorney who can help you sort through these issues.  I often have this discussion wtih new clients as part of a free initial consultation, so the cost should not get in your way.   But you need to have this conversation to prevent making mistakes that will cost you much more in the long run.  The bottom line is that unless you find factors that outweigh any deficiencies of your own state's laws, you will generally be better served in your home state.

Getting your business plan off on the right foot.

If you are thinking about dragging yourself out of the recession and launching that new venture, you should read this great article from the Wall Street Journal today to make sure you get it started right.  Often, new ventures fail before they even get started from a lack of planning.  But as John W. Mullins notes, there are some basic ways to ensure your business plan ends up on investor's desk rather than the recycling bin.