Law School—Evidence

An old legal adage is that if your case is weak on the law, argue the facts, and if it is weak on the facts, argue the law. In every legal dispute, those are the primary components, law, and facts. The law changes quite slowly and usually only through legislation or a change in court decided law. Applying the same law to different facts usually yields different results. So it makes sense that in any dispute getting to know your fact is quite important. Hence if you are mad about something or think you’ve been wronged, or find yourself yelling, “I’ll see you in court,” to some miscreant former business associate, do two things: (i) Collect all documents that have anything remotely to do with that dispute, and (ii) start writing long emails to your lawyers telling them what happened. You will have to produce the former in response to discovery from the other side, and the later will be attorney-client privileged communications that give your counsel the foundation to start applying the law correctly. The Buzz has told many a client that lawyers are like computers; garbage in, garbage out. Great lawyers, like great computers, have an encyclopedic knowledge of the facts in their case. Are you working with a mainframe, or a refurbished Commodore 64?
-- Paul Marotta

Start-Up Supporting Venture Capital

We have observed several cycles and it seems like venture funds that do well, raise too much money in subsequent funds to invest in start-ups for long, and have to look to larger private equity deals. Those that don’t do well, go do something else. The end result; there is not much real continuity in start-up focused funds. And we need start-up focused funds. Recent statistics showed that the entire 2000-2010 decade has been relatively bad for venture capital, and that is bad for, as a friend of mine put it, the “entrepreneurial eco-system.” The National Venture Capital Association recently provided data showing that, for most of the last decade, a dollar invested in a venture funds resulted in that same dollar being returned to the fund investor. In other words the return was essentially flat; you got your principal back and nothing else. An article commented both that (i) the answer seemed to be smaller investments in smaller companies, and (ii) maybe venture capital is not needed since some tech start-ups need far less money to start than their uncles did in the 80’s. We have always argued that the real goal of all those supporting growth companies should always be a well run company. But we understand that venture capital is a money management business, not a start-up supporting business. However, we believe that you accomplish the former by supporting the later. It’s always true that to fold the portfolio company means lower returns than to fund a way to continue and build it.

-- Paul Marotta