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Posts Tagged ‘Shares’

Valve’s Gabe Newell shares his thoughts on DRM

At this year’s Game Developer’s Choice Awards, Vavle’s Gabe Newell won the Pioneer Award, and he used the opportunity to share a slide show with the crowd of developers, press, and business people. His message? DRM is not good for business.

He spoke about DRM adding negative worth to products, and his remarks were greeted by loud and enthusiastic applause. 

“One thing that you hear [Valve] talk a lot
about is entertainment as a service, it’s an attitude
that says ‘what have I done for my customers today?’” he said. “It informs all the decisions we make, and once you get into that mindset it helps you avoid things like some of the Digital Rights Management problems that actually make your entertainment products
worth less by wrapping those negatives around them.”

Of course, Steam is itself DRM pretending to be a service, but as long as gamers are willing to trade the ability to sell their games or have a physical copy for the added features and convenience offered, Newell will continue to have a good thing going. DRM isn’t going away, but at the very least its harmful effects can be minimized.

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Ask the attorney: What’s the best way to split equity?

(Editor’s note: “Ask the Attorney” is a weekly VentureBeat feature allowing start-up owners to get answers to their legal questions. Submit yours in the comments below and look for answers in the coming weeks. Author Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a boutique corporate law firm specializing in the representation of entrepreneurs.)

Question:  My two friends and I have been working on a new venture for almost a year.  Our site is in beta and we actually have a few customers (it’s a subscription-based model).  We’ve spoken to a lawyer about incorporating, but we don’t know how to split-up the stock.  Should everyone just get one-third?

Answer: Not necessarily… The splitting of equity is a significant business decision, which must be negotiated among the founders based upon their respective contributions to date and their expectations going forward.  Simply dividing the shares equally among the three of you may sound fair on its face, but it’s usually not the correct decision.

Factors you need to consider include:

• Whether any of the founders contributed cash and/or intellectual property to the venture – which would warrant a higher percentage for that founder.
• Whether any of the founders will be working part-time or less than the other founders going forward – which would warrant a lower percentage for that founder.
• Whether any of the founders put in more time prior to the incorporation (or actually started the venture) – which would warrant a higher percentage for that founder.
• Whether any of the founders will have greater responsibility or will be adding more value going forward than the other founders – which would warrant a higher percentage for that founder.

The bottom line is that every venture is different, with varied contributions (past and future) by the founders.  It might help to sit down with your co-founders and your lawyer and hash this issue out.  As I have previously discussed, you will also need to hash out the vesting schedules, including whether any founders will vest a portion of their stock “up front” and/or whether a  one-year “cliff” will be imposed on any founders.

Something else to keep in mind: When launching a venture, the first rule of thumb is to incorporate as soon as possible (when the venture has as little value as possible).  Among other things, this allows you to be able to issue stock to the founders for a nominal purchase price, meaning they can share in the increased value of the company (and quickly begin the capital gains holding period).

To the extent the venture’s incorporation is delayed and its value increases (due to the meeting of certain milestones, etc.), there may be tricky tax issues with respect to the purchase price or value of the shares issued to the founders.  If the company were ever audited, the IRS may take the position that the shares sold for a nominal purchase price actually had value. That would make those shares a form of compensation to the founders (particularly if the shares were issued on a date close to a financing date) and there would be taxes due on them.

As I have previously discussed, another good reason to do this is to protect against personal liability. Good luck!

Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

Tags: ask the attorney, legal quesions

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Apple shares jump on news of Jan. 27 event

Filed under: Other Events, Apple Financial, One More Thing

The news that Apple is going to announce something on January 27th has the stock market in a tizzy. At one point this morning, Apple shares were up to $214.16, up $8.23 or about 4.0%.

Apple set a 52-week high with a share price of $215.59 on January 5, 2010, up 275.6% over the 52-week low set on January 20, 2009.

The Dow Jones Industrial Average, by comparison, was up only .95% shortly after 1 PM ET today, and the NASDAQ index was up about 1.17%.

It should be noted that Apple share prices traditionally fall after an announcement, but it will be fascinating to see if AAPL is able to hit a new high prior to the January 27th event.

[via MacDailyNews]

TUAWApple shares jump on news of Jan. 27 event originally appeared on The Unofficial Apple Weblog (TUAW) on Tue, 19 Jan 2010 13:30:00 EST. Please see our terms for use of feeds.

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LawCrunch: Some (More) Ideas On Why Nokia Sued Apple

Disclaimer: Jeremy Kessel has a J.D., but is still waiting for his (July 2009) California Bar Exam results. Thus, he is not (yet) a licensed attorney. Barry L. Cohen, who also shares some insights below, is a licensed attorney. Regardless, this post is not meant as legal advice or analysis and should not be construed as such.

As many of you are aware, Nokia filed a lawsuit against Apple last week in the Federal District Court in Delaware. Nokia’s complaint alleges that Apple has infringed on 10 of Nokia’s patents for various, “fundamental” GSM, UMTS and wireless LAN (WLAN) technologies. In particular, the patents cover wireless data, speech coding, security and encryption. Nokia believes that all 10 patents have been infringed by all Apple iPhone models shipped since the iPhone was introduced back in 2007.

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