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Posts Tagged ‘Tips and Advice’

Yesterday, we hosted our very first women entrepreneurial session, powered by women for women.  With no surprise, it was so inspiring to watch the women entrepreneurs mind share and help one another in such an honest and open setting.  There was an instant connection between them all…entrepreneurs wanting to take the world by storm and willing to help one another get there.  The fierce leader of the pack was our guest speaker, Dianna Mullins from Glam Media.  Dianna is a serial entrepreneur herself, starting her first company before she could even drive a car.  The topics and issues that surrounded yesterday’s discussions included building a team at an early stage, how to hire the right people, retention, and finding the right group of advisors and investors.   Here were some of the highlights from Dianna and the group:

  1. Before you do anything,  it’s important to know who your team is (regardless of it being one, five or six members, etc.).  As a founder, it’s important to figure out what value you or the company will add to each individual in your team and vice versa. This will ensure that everyone has something to bring to the table and the goals and vision are the same across the board.
  2. Your team is the core of your company.  Whether it is the admin or the engineer, or the temp or the perm hire, everyone should be treated equally.  This will increase the liklihood of happy employees and longevity of a company.
  3. The Startup Wiggle – trying different levers to see which one takes.  Usually implemented at most early stage companies.  When building your team, find the individuals who are resilient and motivated to do the startup wiggle.  Choose people who have creativity, courage, and conviction.  You want someone who will challenge you, but also a balance so they’re not constantly opposing you and your visions.
  4. Don’t fear failure.
  5. When hiring, look for attitude, tone, and skill.  You want to make sure their attitude is the right fit, their tone is respectful and appropriate, and they have the skill set your company needs.
  6. Know who you are.  You have to know who you are as an individual, a company, and a founding team.  If you can’t answer this, it will make it very tough (when hiring) for you to step into the other person’s shoe and determine whether it is mutually beneficial for him/her and your team.
  7. Letting go of someone from your founding team can feel like a divorce.  So make sure you put a lot of thought and effort into who you are hiring.
  8. Advisors will give you connections to an area you don’t have much knowledge or understanding in.  If you have someone in mind to play an advisory role, don’t call them one right off the bat.  Build a relationship and see if they’ll offer you advice or help you out with a project.  Some of the best advisors never have the official advisor title.  In finding the right advisor?  It’s like courting, you just know.
  9. Figure out your plan, execute, check it, and repeat. Focus on the business first and then everything else will fall into place (fundraising, etc.).
  10. In sharing and selling your vision during the early days, you want to be like Tom Sawyer and get people to help you paint the fence.  It’s sometimes boring as hell, but you want to be the first one who gets the party started.

Participating Companies:

BabyList - a baby registry that helps new moms discover, share and buy the things they need for their baby.

CaptureProof - creating and implementing innovative technologies that allow patients and practitioner to capture, share, search and analyze pertinent media.

Clever Girls Collective - a technology-driven social media company connecting  brands with social influencers while offering social influencers exciting content monetization.

KidAdmit - apply to multiple preschools and manage the admissions process in one place.

LocoMotive Labs - assistive and play-based learning applications to empower kids with special needs to be independent learners.

LookMazing - a fashion social network that rewards individuals for transforming outfit photos into shoppable looks.

Share Some Style - a community marketplace that connects people who need fashion advice with local stylists.

Womens session 1

“You have to be naive to do what we do or else you wouldn’t do it.”
~ Dianna Mullins, Glam Media

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By: Renee DiResta (Associate at O’Reilly AlphaTech Ventures)

As a seed stage venture associate, one of my main responsibilities is evaluating new investments. There are typically upwards of 20 first-round meetings in any given week, so I see a lot of pitches. Let’s talk about the most common mistakes people make when presenting, with a particular focus on the first-time pitch.

Not targeting appropriate investment partners

First and foremost, before you start a conversation, it’s important to know that you’re pitching to the right type of investor. If you don’t have a prototype in at least the alpha or beta-test stage, chances are you’re a bit too early for most institutional venture capitalists. Your most likely source of capital will be angel investors. It’s still good to reach out to VCs – we like to form relationships early and watch a product grow – but don’t be surprised to hear, “Let’s keep in touch.”

Besides investor stage, it’s important to choose partners who are a good fit for the particular sector you’re working in. The ideal investor is more than someone who writes a check – it’s a partner who understands your market, and can add value via their expertise and their network. You should typically avoid pitching VCs who have invested in direct competitors, as they will generally not fund a company if there’s a potential conflict of interest.

Asking the VC to sign an NDA

It likely won’t happen. Here are a few great posts by other investors that explain why in more detail.

Not having a deck

A good pitch should be a conversation, with a lot of back-and-forth questions and answers. Some entrepreneurs take this to mean that they don’t need a deck, especially if they have a prototype to demo. While a demo is the best way to convey what you’re doing, many investors (myself included) still appreciate a deck because it acts as an outline for your story. It helps to frame and focus the conversation, and is particularly useful for calling attention to important metrics (signups, downloads, usage over time, etc). It doesn’t have to be anything complicated; in fact, it should be quite simple. A good deck should have around 10 slides, with maybe a few additional for appendix-style materials to respond to anticipated questions. There are many resources out there for how to put together a good deck.

Presenting yourself as technology in search of a problem

While investors love to hear about innovative new ideas, we’re also very interested in what pain point the technology addresses. I want to hear about why your product is necessary. What problem does it solve? Who has that problem? At the early stage, it’s common for an entrepreneur to be exploring several potential target markets, and it’s perfectly acceptable to offer visions for multiple potential markets. Just don’t be technology in search of a problem…make sure you have a sense of who your customer will be, and convey that to the investor.

Misrepresenting the market landscape

This mistake generally takes one of two forms: exaggerating the size of the market, or ignoring the competition. When you think about your market, it’s important to differentiate between “market size” and “addressable market size.” For example, if you’re a K-12 edtech company, don’t describe your market size to the investor in terms of total dollars spent on education across the board at all levels. Talk about it in terms of the market you’re capable of reaching – your specific niche.

Similarly, many entrepreneurs make the mistake of telling an investor that they have no competition because there isn’t a company out there with their exact feature set. You have competition, even if it’s simply pre-existing user behavior. Know what you’re up against, and why you’re different, and be comfortable explaining that to an investor. If there truly is no competition, it’s highly likely that’s because you’re not solving an actual problem.

Not emphasizing why you are the person the VC should fund

So much of early-stage investing is making a bet on the entrepreneur. The product can and will change, so early-stage investors want to fund founders who can adapt and execute. The best idea in the world isn’t going anywhere if the founder isn’t passionate about the problem he or she is solving. So tell us about yourself and your team, not just the idea.

One final point: Many entrepreneurs wonder if it’s worth their time to pitch a non-partner. The reality is that analysts and associates can’t write checks, so if you have a connection to the firm and can get right to a meeting with a partner, go for it. But if not, keep in mind that the junior investor’s incentives are aligned with yours – they want to find great companies, and if they believe in a deal, they will advocate for it and help it through the pipeline. So make sure that you don’t convey a sense that meeting with the junior person is a waste of your time. 

A good first meeting is like a good first date. You’ve told your story and piqued the investor’s interest. End the meeting with a discussion about next steps. And prepare for your next meeting by thinking about the questions you were asked; those questions are a pretty good indication of what the investor is most concerned about, and alleviating those concerns will increase your chances of getting funded.

Good luck!

Renee DiRestaRenee DiResta is currently an Associate at O’Reilly AlphaTech Ventures, where she researches emerging technology trends and supports portfolio companies. Prior to OATV, she spent six and a half years as a trader at Jane Street Capital, a quantitative proprietary trading firm in New York. Renee holds a B.S. in Computer Science and Political Science from the State University of New York at Stony Brook. Follow her on Twitter at @noupside.

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By: David Ehrenberg (CEO of Early Growth Financial Services)

I’ve seen and worked with a lot of companies that have tried to do their own accounting. It’s not pretty. In these situations, we often have to go back to redo their work and re-file taxes, resulting in a greater cost for the company than if they had just outsourced their accounting from the get go.

Even so, many early-stage startups continue to be on the fence about hiring an accountant to provide financial support. In the early stages, startups are busy trying to bootstrap, stretch limited funds, and cut costs wherever necessary. One of the ways you, as an early-stage entrepreneur, may try to save money is by choosing to manage your own accounting and finances. If you’re an experienced accountant, this makes sense. If not, this could be a serious mistake that negatively impacts the potential growth and success of your business.

I’m not recommending that you run out and hire a full-time accountant. The better, more cost-effective plan is to save on staffing costs by outsourcing your accounting services. That way you can pay for only the exact level of day-to-day transactional work and accounting support that your company needs.

When to Hire an Accountant

So when should you hire an accountant? As with so many early-stage company questions, the relatively unhelpful answer is, it depends. There are many good reasons to contract with an accountant very early on, while some companies may decide to wait. But, here are two good rules of thumb…You definitely need to hire an accountant if:

1. You have raised an initial round of funding. A $500K raise is a good benchmark. If you have raised a Series A, a larger SEED round, or a larger convertible debt round, it’s definitely time to engage with an outsourced accounting firm.

2. Your expenses are significantly increasing. If you have increased expenses to keep track of and have taken on some employees, you are in need of greater financial reporting. When your business starts to grow, it’s important that your understanding of your cash flow and burn grows as well.

What Does an Early-Stage Accountant Do?

Any accountant you contract with should be able to provide a wide range of services to support you through the early stages. Here’s an abridged list of services that accountants provide when you’re:

Starting up:

• Business licenses

• Incorporation filings

• System implementations

• Policies and procedures

• Expense tracking

• Financial planning

Up and running:

• Month-end accounting

• Revenue accounting

• GAAP financial statements

• Contracts administration

• Payroll

• AR/AP (accounts payable/accounts receivable)

• Tax preparation

• W2 and 1099s

• Financial reports

• Fixed assets tracking

Growing your business:

• Pricing

• Cash flow analysis

• Audit support and preparation

• Financial forecasting

• Budget creation

Benefits to Outsourcing Your Accounting Function

As you can see from the list of functions above, your accountant does much more than just sit around with a green eye-shade tallying numbers. An outsourced accounting firm will give you much-needed support in many areas of your business while also providing the following benefits:

Focus on your core business. Perhaps the most important reason to hire an accountant is so that you and your early employees can focus on building your product, developing relationships, creating partnerships, and marketing and sales. In other words, you have core business versus non-core business. In the early stages, especially, you need to learn to separate core from non-core and focus on your core business, without worrying about other elements.

High-quality financial information. When you’re trying to raise equity funds or obtain debt or reach out to potential investors, you need to have the kind of high-quality financial information that outsourced accountants provide. These kinds of financial statements are also essential for tax reporting purposes and providing updates to your investors. Equally important, the financial information provided by your accountant will give you great insight into the nature of your business which is invaluable in developing effective business strategies.

A valued business partner. Outsourcing your accounting function also gives you the advantage of having another trusted business partner. Outsource firms have extensive expertise working with early stage start-ups. This sort of expertise and experience can be invaluable for your company when it comes to raising funds, financial planning, negotiating term sheets, structuring deals, financial reporting, etc.

Essentially, if you think your startup may be in need of accounting support, it probably is! Remember, it’s better to get the accounting support you need early on rather than have to clean up your messy finances further down the road. It’s really never too early to put into place the financial systems and processes that will serve as a strong foundation for your startup and support its financial health.

Large Ehrenberg HeadshotDavid Ehrenberg is the CEO of Early Growth Financial Services (EGFS) which offers a complete suite of financial services for businesses at every stage of the development process. He has spent his career working with early-growth companies, and founded EGFS in 2009 to provide a service that he found lacking: high-level financial strategy consulting and day-to-day transactional accounting support for startups. EGFS offers CFO and accounting consulting services on-demand, to provide expert financial assistance including fundraising, financial forecasting, AP/AR, and tax preparation. David’s expertise includes building high-growth technology companies, venture funding, debt financings, mergers and acquisitions, strategic planning, accounting, and legal and corporate governance.

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By: Neil Joglekar (Co-Founder or ReelSurfer)

Last Thursday, Christian and I were asked to give a guest lecture at the Entertainment Technology Center at Carnegie Melon. We were asked to describe three things we have done right for our startup and three things we did very wrong. (Why is it always easier to come up with the list of things we did wrong?) I thought it might be helpful to share what we presented.

Welcome to part two, where I want to share some advice based on what we have done wrong. If you missed it, here is part one where I described what we have done right as a startup.

1. Build the team carefully

The quality of the team is probably the number one reason a startup will succeed or fail and that starts with your co-founder. I got lucky here – Christian and I were friends in college and had worked on a few class projects together. We knew we had complementary skills and also could perform under pressure.

The next step is hiring non-founders. Luckily for you, I think we made just about every mistake possible. I have these pieces of advice for you:

  • Don’t hire friends or family: This is hit or miss because in some cases we hired friends and it worked out great. The other times it didn’t but it was hard to fire them since there were implications outside of just the workplace. “You can’t fire me I thought we were friends.” The best way to avoid that is to set clear expectations beforehand and then have objective conversations about their performance. Gray areas are a problem.
  • Attitude matters: People say you should hire the smartest people you know. While that is mostly true, you have to make sure that their attitude matches their intelligence. For example, if you hire someone who is the most brilliant AI programmer alive but doesn’t want to get his hands dirty and make a rounded rectangle a different shade of blue you are going to have a problem. Screen for culture fit / hunger and take it very seriously.

2. Don’t raise money too early

Right after we graduated from college, Christian and I decided that we needed to raise money. We didn’t have a (fully-baked) product, a plan or any sales but thought that for a “company” at our stage we should have some investors. Looking back, it seems as ridiculous as it sounds writing it. We probably sounded like this.

Though we had approximately $500k committed, we ended up backing out of the deal. I could not be happier that we did, looking back here were the problems:

  • We didn’t know what we were doing. Back then we were committed to the idea of building a consumer website for helping movie lovers find their favorite quotes – licensing and copyright be damned. If we had taken the 500k we would have blown through it for the wrong idea and be working elsewhere right now.
  • The terms were not favorable. Investors saw us as fresh-faced college kids who may develop something interesting and they preyed on that. When you start to give up significant control of the company at the seed stage it puts a strain on a company forever. To be fair we did not know how to really negotiate with investors or which terms really mattered.

The truth is raising money is sexy. TechCrunch and other blogs cover funding stories and it’s something that you can send to your mom. But try and hold off – raising money when you are not ready can effectively destroy your opportunity to run a startup at all.

3. Listen to feedback

Make something people want is the Y Combinator motto for a reason – I don’t think anything is more important for a startup. At the end of the day, nobody really cares about your startup except for you, your team and your family. You are constantly fighting other companies of all shapes and sizes for people’s time and attention. Winning this battle is hard once you have product / market fit, but if you are not starting by building something people want you are definitely going to lose.

When we first started ReelSurfer we thought we knew what people wanted but quickly realized that people will tell you what they really want. You need to constantly ask people for feedback on the product. It’s actually pretty simple – people love to give their opinions. If you are building something they are pretty open about telling you what is right and wrong. Here are a few things we do to try and build what people want:

  • Run usability studies. Invite someone into a room for 30 minutes and watch them use your product. Ask them what their background is, why they would use your product, and what would make them come back every day. All of their answers may not be helpful but you will start to see trends.
  • Run A/B tests. If people won’t give you feedback in person remember that data never lies. What people are clicking on is the clearest indicator of what is working and what is not.
  • Build something that a few people really love. Even if this is not a scalable action remember that each person represents a group of people like them. So as YC says, if you can get 100 people to LOVE your product then you have a chance at tapping into a larger audience.

I would love to hear what things you are doing wrong in the comments and maybe I’ll be able to help.

Neil JoglekarAbout the blogger: Guest author Neil Joglekar is a co-founder of ReelSurfer, a Y-Combinator funded startup that lets users create a highlight from any video on the web. Neil is a graduate of Stanford University, frequent guest speaker on digital media, and was honored by the World Economic Forum as a Global Shaper. You can find Neil on Twitter @njcar.

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From us to you.  Another wonderful coaching session provided by Orrick TOTAL ACCESS with the lovely Renee DiResta from OATV.  We’re now accepting executive summaries from entrepreneurs from all industries in tech excluding consumer apps that fall into the “mobile-social-local” space and e-commerce companies that have a flash sale/groupon model.  We’re not purposely trying to isolate these two types of companies, Renee just wants to make sure she’s providing the best coaching advice possible and those two groups aren’t really in her realm of focus.

With that aside… submit your exec summaries now!  For more information, see below.

Because space is limited, attendees must apply and be approved to attend.

Details and How to Apply:

  1. Entrepreneurs in all industries are welcome to apply with the exception of:
  • o    consumer apps that fall into the “mobile-social-local” space
  • o    e-commerce companies that have a flash sale/groupon model
  1. Send your one-page executive summary to Joyce Chuang by Sunday, September 16 by 11:59 pm (PST). Click here to find a template for your summary.  Please follow the template as it makes it easier for the investor to review.
  2. We will notify you by Wednesday, September 19, as to whether or not you have been approved to attend.
  3. Once approved, you will be assigned a 30-minute time slot between 1:00 pm – 4:00 pm.  Each time slot consists of 5-minutes to present your company and demo and 25-minutes for Q&A.
  4. We will have a laptop in the room available for you to use or you may bring your own.  The room will be equipped with wireless internet.

Investor Information:


Meet:
Renee DiResta, Associate
Thursday, September 20, 2012
From 1:00 pm – 4:00 pm at Orrick’s San Francisco Office

Applications Due:
Sunday, September 16, 2012 by 11:59 pm (PST)

Please contact Joyce Chuang or tweet @OrrickTA with any questions.

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Orrick’s TOTAL ACCESS program’s Coaching Sessions is a series developed specifically to help entrepreneurs get the advice and business connections they need to take their companies to the next level.

Because space is limited, attendees must apply and be approved to attend.

Details and How to Apply:

  1. Only entrepreneurs in the following industries will be considered:
  • Local Commerce
  • Online-to-Offline Transactions
  • Startups focused on Android (rather than just iOS)
  • Startups bringing the digital revolution to older industries in such a way that the other industries are adopting the new startups
  1. Send your one-page executive summary to Joyce Chuang by Friday, August 17 by 5:00 pm (PST).  Click here to find a template for your summary.  Please follow the template as it makes it easier for the investor to review.
  2. We will notify you by Tuesday, August 21, whether or not you have been approved to attend.
  3. Once approved, you will be assigned a 30-minute time slot between 1:00 pm – 4:00 pm.  Each time slot consists of 5 minutes to present your company and demo, and 25 minutes for Q&A – please prepare your questions in advance.

Investor Information:

 

 

Meet:
Richard Mordini, Associate
Thursday, August 23, 2012
From 1:00 pm – 4:00 pm at Orrick’s San Francisco Office

Applications Due:
Friday, August 17, 2012 by 5:00 pm (PST)

You will be notified by:
Tuesday, August 21, 2012

We’re looking forward to another great coaching session from Richard and hope you’re all able to get your executive summaries in before the deadline!

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By Don Keller (Partner, Emerging Companies Practice in Silicon Valley, Orrick, Herrington & Sutcliffe LLP)

It used to be that when entrepreneurs started their companies, the idea of going public and making it big was on top of every founder or CEO’s checklist.  Nowadays, it seems that startups are constantly looking to build a great product that will attract the most users and then cross their fingers that the Googles or Microsofts of the world will acquire the company (or the team).  I gave a presentation yesterday at RocketSpace, an accelerator for seed-funded technologies in San Francisco, about best practices and top mistakes companies make during acquisitions. So for those of you who are interested in going down that route, here are some things to note as you prepare your company and team for the road to acquisition-ville.

1.  Founder Equity – Make sure founder equity is held in the form of shares, not options.  Shares allow founders to get all of the appreciation taxed at capital gain rates, whereas options typically result in the appreciation being taxed at ordinary income rates.  This can make a huge difference in the amount of take home pay.

2.  Protect Your IP - One of the biggest mistakes companies make in the early stages of their development, is not dotting all their i’s and crossing their t’s when it comes to protecting their intellectual property.  Make sure that when IP is involved, you work with a good lawyer to ensure that your IP is not owned by a former employer and that all of the IP has been properly assigned to the company.  The last thing you want is for your company to take off and then get hit with a notice that your IP is not actually your IP.

3.  Keep Your Options Open – To maximize your price, companies should leave themselves with alternatives to the buyers they are targeting.  You want to make sure that you’re not selling yourself short and putting all your eggs in one basket.  This does not make for a good negotiation strategy and is less likely to get you the best price.  If a buyer knows that you have only one alternative, the price will fall like a rock.

4.  What to Avoid Selling – Avoid selling the company for private company shares in a transaction that is taxable.  There is typically no market for private company shares so getting someone else’s private shares in an acquisition and having to pay tax on those shares, leaves you with an out of pocket cost and nothing to show for it other than some shares you cannot sell.  If the transaction is properly structured, the receipt of the buyer’s shares can be nontaxable (at least until you sell those shares) which is what you want.

5.  The Art of Negotiating – When negotiating on price, make sure you understand all of the adjustments to the price such as escrows, legal fees, balance sheet adjustments, and special indemnities.  Once you sign the 60 or 90 days no shop agreement, the buyer has all the leverage.  You don’t want to learn at that point that the price they said they would pay is before massive deductions.  It’s important to negotiate the terms right out of the gate so there are no surprises when it comes time to seal the deal.

6.  Open Source – Make sure you understand open source and how it’s used in your product.  Always double check to make sure that you have complied with the open source license terms.  It doesn’t happen often, but every now and then, this can be a deal breaker for buyers.

7. Keep Up with the Kardashians…I mean Housekeeping – Do not, and I repeat, do not wait until the last minute to catch up on cleaning your minute books and stock option pricing (409A issues).  It is important that your documents are maintained and updated on a regular basis.  If you wait until the last minute, it can create unnecessary headaches and disorganization.  The last thing a buyer wants to see is a company that can’t keep their documents up to par.

8.  Don’t Wait Until the Last Minute – Rolling over from #7, another important thing to note is that you shouldn’t leave the negotiation of employment and non-compete agreements until the last minute.  These are things that should be brought up as soon as discussions begin.  Time and again, these agreements are negotiated at the last minute with lots of pressure on the founders to sign and be happy.  Don’t let that be your situation.

9. Be Wary of Earn-Outs – Earn outs are a lawyer’s dream.  They almost always end in disputes about whether the buyer tried hard enough to generate revenue to meet the earn out thresholds.  Don’t count on any earn out payments and negotiate accordingly.

10.  Pay Attention to Your Board Members and Investors – It’s very important to listen to what your board members and investors are saying during this time.  You want to keep an ear out for biases for or against a sale and also take heed to strategic investor reactions to a sale.

There is no full proof way of being certain that by following the advice above, the road to acquisition will be an easy route.  However, best practices can provide entrepreneurs a clearer path and hopefully increase the likelihood of your company’s success.

About Don Keller:  Don is a Partner in the Emerging Companies Practice at Orrick’s Silicon Valley office. He advises emerging companies, public companies, venture capital firms and investment banks and has represented clients on more than 60 public offerings, 75 acquisition transactions and several hundred venture financings.  Don has worked on transactions for companies including Apple, Google, Oracle, and Rambus and represents clients such as eHarmony, OPOWER, and LS9, among many others.  For more information, you can visit his full biography.


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Orrick’s TOTAL ACCESS program’s Coaching Sessions is a series developed specifically to help entrepreneurs get the advice and business connections they need to take their companies to the next level.

Because space is limited, attendees must apply and be approved to attend.

Details and How to Apply:

  • Only entrepreneurs in the mobile industry will be considered.
  • Send your one-page executive summary to Joyce Chuang by Thursday, May 3 by 12:00 pm.  Click here to find a template we suggest you use for your one-page summary. Please follow the template as it makes it easier for the investor to review.
     
  • We will notify you by Monday, May 7, whether or not you have been approved to attend.
     
  • Once approved, you will be assigned a 30 minute timeslot between 9:00 am – 11:00 am. Each timeslot consists of 5 minutes to present your company and 25 minutes for Q&A – prepare your questions in advance.  We will have a laptop in the room available for you to use or you may bring your own.

Investor Information:

 

Meet:
Bryan Schreier
Tuesday, May 8, 2012
From 9:00 am – 11:00 am at Orrick’s Silicon Valley Office

Applications Due:
Thursday, May 3, 2012 by 12:00 pm

You will be notified by:
Monday, May 7, 2012

Please contact Joyce Chuang or tweet @OrrickTA with any questions.

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