Monday, 22 July 2002 09:42

Financial Services Advocate

Linda Stevenson has spent most of her career in banking. Even when she took time off to raise a family, she continued working part time in banking.

But her devotion to the profession doesn’t just stem from her education or devotion to her employer, National City Bank. She’s in it for the entrepreneurs.

“I really love what I do because I’m just fascinated with the courage entrepreneurs have and the sacrifices they make to start their businesses,” says Stevenson, who has been working for National City or its predecessor banks since 1982. “I get to be a part of that process and help them. It’s like I have a piece of ownership in them.”

Stevenson, a lifelong Erie resident, is an assistant vice president of National City and focuses entirely on the small business sector, particularly with the bank’s SBA lending program. She has served with its small business program for the entire 10 years of its official existence, spending as much time servicing customers in Pittsburgh as she does in Northwestern Pennsylvania. In fact, she was part of the team, led by Thomas Golonski, president and CEO of National City Bank of Pennsylvania, that created the program.

“We had the foresight to recognize that small businesses are critical to the region,” she says.

Now, she says, she has had the privilege of beginning to see a new element emerge and prosper in Western Pennsylvania: women-owned businesses. To feed her passion for that sector, she recently helped set up a PowerLink advisory board chapter in the Erie area, which puts together business advisory boards, at no cost, for qualified women-owned businesses interested in growing aggressively.

Says Stevenson of entrepreneurship and her role as a banker in that world: “It’s really fun to be part of it.”

Daniel Bates

Published in Pittsburgh
Monday, 22 July 2002 09:42

Young Entrepreneurs of the Year

Dan Friedman and Mark Alley began their pavement maintenance company in 1997 with a simple philosophy — go after the business you know you can get, limit expenses and make customers happy through quality workmanship and excellent service.

Directing their efforts at residential customers, the AmeriCoat founders devised a direct-mail campaign aimed at homes valued at $125,000-plus and focused on Upper Arlington, Bexley and Clintonville and nearby Delaware and Marysville. Five percent of all distributed fliers, which feature AmeriCoat’s uniformed employees and gleaming equipment, result in contracts.

“It’s not a blind campaign,” said Friedman. “We’ve built a database which holds almost every single driveway in Columbus. We know whether it’s asphalt or concrete and how big it is. We literally can market at will and get as much business as we want.”

Alley says the company compiles data by using staff and temporary employees to conduct neighborhood surveys during the off-season.

AmeriCoat has been profitable from the start, reporting a $16,000 net profit on revenues of $151,000 in 1998, the first full year of operation. The 1999 revenues for the 10-employee company, six full-time and four part-time staff, jumped to $250,000. AmeriCoat hires additional, temporary employees during the busy season, using seven crews to do the work.

When Friedman, 30, president, and Alley, 26, vice president, founded the company, they needed to control salary expenses. Friedman stayed on with employer Black & Decker for three years during AmeriCoat’s planning and launch stages, and Alley continued working at S.T.A.R. Seal of Ohio until 1998. Both had developed their careers with promotions through sales and marketing positions.

“They’re extremely creative and innovative in their approach to marketing,” says their National City banker, Anne Jennings. “When they applied for a loan, they gave one of the most professional presentations I’ve seen.”

Soon after getting the loan, Jennings said, the pair didn’t hesitate to ask her to help get National City as a client.

“They’re not timid,” she says. “They go after business aggressively.”

Jennings, vice president of National City’s business services group, says even when the AmeriCoat team loses a contract bid, they follow up with customers to find out why and make improvements.

Although AmeriCoat services other commercial accounts, including Lone Star Steakhouse, 75 percent of its business is residential. This year, Friedman and Alley expect the company to be the market share leader in the residential segment of the market.

But while business was excellent June through September, the owners had been looking for ways to keep staff employed and trucks running during the cold season. They considered snow removal but deemed it too difficult and unpredictable.

A flier dropped off to Alley’s family in Indianapolis, offering to string Christmas lights for a fee, provided the answer. Why not try it in Columbus, Alley and Friedman thought. The same equipment used for AmeriCoat could be put to another use. Dubbed “The Light Before Christmas,” the new venture debuted in 1999.

“The response has been tremendous,” says Friedman. “We did hundreds of jobs and booked up almost instantly. We had to turn away a great deal of business because we didn’t have the capacity to fill the orders.”

Most customers opt for the mid-sized order: 2,000 lights for $150, Friedman says. The company did few commercial orders, but Friedman says companies will be a major focus in 2000. The pair has a smaller operation of The Light Before Christmas in Tampa and hopes to franchise the company in the next few years.

This year, they’ll try a new form of direct mail for both operations that is expected to quadruple their business. While AmeriCoat already has a small operation in Grand Rapids, Mich., the partners want to expand the company in the next five years to cities close to home — Cincinnati, Cleveland and Indianapolis. They know business will grow steadily, one customer at a time.

“We may not turn a profit on an individual customer,” says Friedman. “But they’ll keep us for life because they’re tickled that we’re relentless in keeping them happy.”

Muntaqima Abdur-Rashid is a Columbus-based free-lance writer.

Published in Columbus
Monday, 22 July 2002 09:42

Veteran Advocate of the Year

Bruce V. Holderead’s dedication to veterans started early.

A veteran himself, Holderead served six years as a communications electronics technician with the U.S. Air Force and Air National Guard. In addition, his first job was working as a veteran’s representative on a college campus, helping veterans go to school with GI funds. Soon after, he went back to school on the GI Bill himself and studied counseling.

Now, for more than 24 years, he has been employed with the Department of Veterans Affairs. Serving as vocational rehabilitation and counseling division officer at the department’s regional office in Cleveland, Holderead is responsible for all aspects of vocational rehabilitation and counseling services for approximately 1,800 military veterans with disabilities.

However, his dedication extends beyond those services, says Lynn E. Johnson, counselor in charge in the Department of Veterans Affairs Columbus Office and Holderead’s nominator for the SBA’s Veteran Advocate of the Year award. Holderead won the award in both the district and state competitions.

“On a personal level,” Johnson writes, “Mr. Holderead is a very congenial fellow, who masterfully blends the human side of life with the achievements of the day. His intelligence, good nature and belief in the importance of his work is uniquely balanced by his attention to detail and ever-present awareness of big-picture progress.”

Johnson adds that Holderead is dedicated to his staff, acting as a supervisor and mentor and encouraging flexibility to accomplish the veterans affairs mission.

Since 1984, Holderead has been an advocate of self-employment programs for veterans with disabilities.

Holderead’s work has allowed veterans throughout Ohio start or expand their own businesses.

In 1998, he developed the Veterans Mean Business Conference to help veteran business owners learn how to do business with local, state and federal government.

The conference was expanded in 1999 to include Cincinnati and Cleveland and to aid veterans just starting their own businesses.

“We had about 250 veterans go through the training last year, and we’re hoping to increase that this year,” Holderead says. “The economy is changing a great deal, and more and more people are working on their own, either self-employed or semi self-employed.”

This year, Holderead plans to continue the conference in eight cities: Columbus, Cleveland, Cincinnati, Akron, Canton, Dayton, Toledo and Youngstown. Plans are just beginning for the conferences, he says, most of which will be held in November.

Holderead gets the most satisfaction out of his job in seeing the results of his assistance to veterans.

“I think the best part is when you see a disabled veteran who’s kind of down and out who gets the support they need, gets the services they need, the training and the assistance,” Holderead says.

They often call him to tell him about the good job they’ve nailed.

“A lot of folks come back year after year and say, ‘I’m still doing great; thanks for all the help you gave me,’” Holderead says. “That’s really rewarding.”

Joan Slattery Wall (jwall@sbnnet.com) is associate editor of SBN Columbus.

Published in Columbus
Monday, 22 July 2002 09:41

Defining roles

As I read a study by SBA’s Office of Advocacy entitled “The New American Evolution: The Role and Impact of Small Firms,” I was startled by the repetition of the word “change” in the text.

Perhaps I reacted because of a course my senior staff had attended, “Leadership in a Time of Change,” designed to give them the tools to bring our employees through a period of rapid program changes and into the future unscathed. More likely, it was because I’d recently read the bestseller by Spencer Johnson, M.D., “Who Moved My Cheese?”

While employment has remained virtually unchanged in the European Union recently, it has increased by at least 14 million in the United States, Jere Glover, SBA’s chief counsel for advocacy, writes in regard to the study.

What accounts for this? Differences in competition, entrepreneurship and start-ups are major factors, he says.

Glover adds that “the American economy is not a still photograph — it’s a dynamic organism that changes while you’re looking at it. Looked at from the perspective of process, change and evolution, small firms make at least two indispensable contributions to the American economy:

  • As sources of constant experimentation and innovation, they are an integral part of the renewal process that defines market economies. They have a crucial role as leaders of technological change and productivity growth. In short, they change market structure.

  • By creating opportunities for women, minorities and immigrants, they are an essential mechanism by which millions enter the economic and social mainstream.”

    The study explores Dynamic Theory, asking why firms start up in industries in which existing firms are experiencing losses and losing market share to foreign companies. The study suggests that “new firms [entering] the industry were not simply to increase output by being smaller replicas of large incumbent enterprises, but by serving as agents of change.”

    “Dynamic Theory favors small firms because it shines the light on change. In the new information economy, continued innovation and change is the rule,” the study states. “More than half of the sales of high technology firms comes from products less than 18 months old. Seen through the dynamic lens of evolutionary theory, the economic welfare implications of the recent shift in economic activity away from large firms and toward small enterprises is welfare-enhancing because start-ups introduce change into the economy.”

    On a different level, “Who Moved My Cheese?” explores the maze of today and suggests that one’s view of change and reaction to its implications greatly affect personal outcomes — and those in business.

    SBA’s programs and employees are changing to move in sync with small businesses. We wish our award winners — and all of your small business friends and relatives — well during their Small Business Week 2000.

    Frank D. Ray is the Columbus district director for the U.S. Small Business Administration. He can be reached at 469-7310 or frank.ray@sba.gov.

Published in Columbus
Monday, 22 July 2002 09:41

Staking a claim

Amazon.com fired the shot heard around the World Wide Web last October when the powerhouse online retailer filed a lawsuit against e-commerce competitor Barnes & Noble for using the company’s patented “one-click” shopping method.

In early December, a judge sided with Amazon, sending Barnes & Noble scrambling to modify its Web site in the midst of the busy holiday shopping season.

Although it was the not the first e-commerce patent battle to surface since business began migrating to the Web, Amazon’s actions sparked strong emotions. In a late February open letter to the company, computer book publisher Timothy O’Reilly accused the Web retailer of “pissing in the well” of online commerce because of its ultra-aggressive protection of business methods that he saw as fairly universal.

Amazon argued that its “one-click” patent, which allows previous site shoppers to order a book and have it billed to them with one mouse click, had been filed more than two years earlier. Nevertheless, the Web retailer was quickly lumped in with other companies, such as Microsoft and Priceline.com, which have also sought legal protection of their online business methods.

Even though these high profile squabbles among powerhouse dot-coms may generate headlines, the bigger question is what these patent cases will mean for the countless start-up e-commerce companies which have yet to be a blip on anyone’s competitive radar screen. The answer seems to depend on whom you ask.

Even two local attorneys, both entrenched in e-commerce law, have different views on what effect e-commerce business method patents may have in the long run. Whether they derail scores of Web start-ups or prove to be the ultimate competitive advantage for innovative entrepreneurs who have the foresight to protect their work, there seems to be one underlying truth: The advantages and dangers of any Web patent depend upon who’s holding it.

The battle over Web business method patents was fueled by a 1998 court decision that computer software is, in fact, potentially patentable. The decision opened the door for the approval of Web patent applications such as the one Amazon had for its “one-click” system, although the road to patent approval is far from a rubber stamp.

David Cochran, an attorney who focuses on intellectual property issues at Cleveland’s Jones Day Reavis & Pogue, says the most difficult burden is proving that you have, in fact, broken new ground with your invention. Since less than a handful of the 150,000 patent applications filed each year are 100 percent original creations, patent approvals are a bit of a gray area.

Not all software is potentially patentable. You still have to prove it’s new and it’s obviously different from what others have done in the field,” Cochran says. “It’s the same thing with these Internet business methods. They’re not all patentable, but some of them could be. You have to analyze what you’ve done that’s new.”

Obviously, the infancy of the Web helped Amazon’s cause, while also making it a prime target for media coverage once the Web retailer decided to flex its muscles against Barnes & Noble. But Cochran doesn’t buy into any “the sky is falling” mentality when it comes to the effect of Web patents.

For one, he says, most of those filed with the U.S. Patent Office are obsolete by the time the arduous approval process is complete. In his eyes, the Amazon and Priceline patents were just two early bets that ended up paying off handsomely.

“You file these patent applications and they take two or three years to mature,” explains Cochran. “Meanwhile, the market develops, and if you’re lucky, develops in the way that you predicted via your patent applications. And when your application finally issues, you’ve got something of value.

“Keep in mind for every one of those that works, there are thousands that just don’t do anything.”

So far, the threats tied to Web patents have yet to filter down past the level of the industry heavy hitters. Michael Stovsky, an attorney with Cleveland’s Ulmer & Berne LLP with expertise in the area of Internet law, says patents have yet to be a threat to any of his clients.

“Has it played a large role in start-up companies we’ve represented to date? No, it hasn’t,” he says. “We have not had one dispute over a company violation of a business patent yet ... Whether smaller companies are going to be held over a barrel by companies that own the business method patent is yet to be seen.”

Although the threat seems to be minimal, Stovsky says issues of trademarks, trade secrets and the possibilities of business method patents should be considered from Day One when it comes to the Web. He believes issues of intellectual property will only become more important as Web start-ups begin to provide serious competition to those e-commerce companies that seem to be holding all of the cards.

“My suspicion is the more mature clients become and the more successful they become, the better competitors they become in the marketplace, the more the holders of these business method patents will sit up and take notice and seek to enforce those patents,” says Stovsky. “And I guess the flip is true. The more mature our clients become, the more concerned they will become about their ability to get patent protection for what they’re doing.”

Cochran, on the other hand, doesn’t worry so much about industry players such as Amazon launching an aggressive campaign to knock off smaller companies. He does agree with Stovsky, however, when it comes to the importance of Web entrepreneurs working to protect their own e-commerce business method innovations. Once Web entrepreneurs realize the importance of patenting their original work, he believes it will be the tool that finally levels the playing field for smaller companies.

“I represent a lot of small fry inventors, particularly in the software area, and these guys need any edge they can get,” says Cochran. “When you’re going up against a Microsoft or an Oracle or some other huge company and you don’t have something to offer back, you’re hosed.”

Several years ago, an e-commerce company named Open Market Inc. issued a press release announcing it had patented the concept of an e-commerce “shopping cart.”

So why hasn’t the company filed lawsuits against the scores of Web companies that have integrated this feature into their own sites? It turns out the list of claims outlined in the patent application was very narrow and Web designers had little trouble creating their own “shopping cart” concepts without infringing on the Open Market patent.

“Just like the deed for your house describes your plot of land and nothing more, the claims that are in the back of a patent application describe what the patentee is entitled to keep other people from doing,” explains Cochran. “Of course, no one reads the claims except for patent attorneys and federal judges.”

So Amazon did not patent the concept of “one-click” shopping; it simply patented a way to deliver this feature to customers, which Barnes & Noble happened to copy too closely. The claims of a patent are always limited in some way, explains Cochran. However, he admits that Amazon attorneys wrote the “one-click” patent claims in such a way that Web designers will not be able to sidestep them as easily as they did Open Market.

“That one definitely is broad,” he says. “If (Amazon) did decide to assert it, that one could be difficult.”

Essentially, Amazon looked at mistakes like those made by Open Market and learned to play the game. That was evidenced by not only the “one-click” patent, but also a 1997 patent application for its “affiliates” program, which allows Webmasters to link to Amazon and receive a small cut of sales that emanate from their sites.

Although the program may seem a fairly ubiquitous Web business concept, Amazon took care to write the claims in that patent application very broadly.

So if Amazon ultimately succeeds in its quest to make these two very familiar business methods purely its own and entrepreneurs cannot create a viable alternative, the pioneering online retailer may have another source of revenue as e-commerce companies line up for licensing deals. For Stovsky, this is the type of scenario in which he believes Web start-ups could end up feeling a severe pinch or, in the worst case, crumble under the stress.

“You can just imagine the state of affairs where a start-up company now has to negotiate with a much larger company like an Amazon or Priceline, which was a start-up just a few years ago, but now it’s sort of like negotiating with an 800-pound gorilla,” says Stovsky. “What’s the effect of that?

“You may see businesses not coming to fruition that may have otherwise because they simply don’t have the resources to get the technology that they need.”

How to reach: Ulmer & Berne LLP, (216) 621-8400; Jones Day Reavis & Pogue, (216) 586-3939

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Published in Cleveland
Monday, 22 July 2002 09:41

Think global, but ...

William Goodlin will be the first to tell you — taking your product or service overseas can prove difficult at best.

He should know. As the long-time president of Bricmont Enterprises, a local engineering firm that designs furnaces for the steel, glass and brick industries, he has taken 12 trips to China in the past two years, 10 days each trip. And he still doesn’t have any contracts there.

But he wouldn’t have it any other way.

Goodlin knows that exporting takes patience, not to mention persistence and some level of fortitude. And the result? Since Bricmont, a Southpointe, Washington County-based firm that employs about 100 people, started targeting overseas projects in 1992, it has increased its annual revenue to more than $50 million. Today, 37 percent of its revenue comes from export sales.

So why aren’t more Pittsburgh-area companies doing it? Wayne DiBartola, a senior technical consultant working with the World Trade Center Pittsburgh, puts it simply: “Business in the U.S. is too good, so they’re reluctant to go international. But I would think twice about that because the future is in the global markets.”

For those willing to try, he offers this advice: “Persistence, persistence, persistence, persistence. And patience, patience, patience, patience.”

Both he and Goodlin, along with World Trade Center director Mame Bradley, are on a mission to increase export activity in the region. They recently took their message to a gathering of CEOs at a CEO Club program.

“We are way behind in terms of export employment,” Bradley told the audience, adding that only one job in 20 in the region is the result of export activity here, far behind the statistics of other metropolitan areas. “But for every billion dollars in exports, 15,000 jobs are created and supported. That’s one job for every $66,000.

“If we could catch up to the rest of the country, we could add 60,000 new jobs immediately,” she says. “The impact of $3 billion on local business is very direct and very powerful.”

The impact on a company’s bottom line isn’t so bad either, Goodlin says. Bricmont earns a profit margin of between 4 and 8 percent on domestic sales. But overseas, it can earn a margin in the neighborhood of 12 to 17 percent. That got Goodlin’s attention.

So where does a company begin? Goodlin offers a laundry list of advice, beginning with a willingness to work with the U.S. government.

“We avoided the government like the plague for 35 years,” he says, before finally realizing that it could help Bricmont immensely in breaking into new markets. Today, the company works actively with the U.S. Trade and Development Agency, the Export-Import Bank, the U.S. Department of Justice, U.S. embassies and the U.S. Department of Commerce in both Pittsburgh and Washington, D.C., among others.

Goodlin says he even relies on the government for cultural information, so that he’s aware of appropriate and inappropriate goodwill gestures and other behaviors before entering a market.

Time is the other significant barrier to entry, Goodlin stresses. As with his Chinese adventure, overseas relationships require a much longer-term view of things.

“When you get into the international market, they don’t know you from Adam,” he says.

That means you have to take the time to get to know the people and how they do business. Overseas, relationships come long before actual sales, in most cases.

Here’s the rest of Goodlin’s checklist for export success:

  • Your senior executives must make a huge commitment to doing business overseas because they will be doing most of the relationship building.

  • Expect to make a large number of trips to those overseas destinations. “They want to see you more and more,” Goodlin says.

  • Be prepared to share three to four times the information you typically provide to prospective customers. “Customers desire education on your products,” he says.

  • Expect your first sale or contract to take as long as three to four years to close, which may be how long it takes to develop a comfortable relationship with the customer.

  • Expect some language barriers. But, Goodlin says, most prospective customers want to speak English in the meetings, even if their English is substandard. “They’ll use you as the English teacher,” he quips.

  • Transportation within some countries can prove difficult, so leave lots of time to get to your business destination.

  • You need a local agent within your target country, which you can locate through U.S. government officials.

Overall, Goodlin says, entering the export arena as a senior executive “does change the way your life is, and your husband or wife won’t see you much ... but they say absence makes the heart grow fonder.” Daniel Bates (dbates@sbnnet.com) is editor of SBN.

Published in Pittsburgh
Monday, 22 July 2002 09:41

That’s the plan ...

Most successful business owners routinely use a business plan to stay on track, seek financing, re-energize their companies, or arrange strategic alliances.

The purpose of the business plan is to make a commitment on paper to a plan of attack, which will determine the direction the business is moving. It should also determine the exact strategy and tactics, the risks and rewards. Here’s where you should begin:

The basics

A business plan should be set up with a cover page and a table of contents. Each section should be tabbed and neatly labeled.

Executive summary

This is the whole business concept in a nutshell —- a complete summary of the rest of the plan. Starting with when and how the business began and ending with projections, this section briefly describes the product/service, what separates the business from the competition, what makes the business successful and what it needs to do to become even more successful.

This should be two pages at most. If it is not well written to compel the reader to continue, it will not get read and ultimately will end up in the round file.

Mission statement

The mission statement is the rudder of the business. It briefly states what the business is about — what its mission is — and is often used in marketing materials.

Background and business concept

Also know as “the company,” this section picks up where the executive summary left off. Basic information about the company, its past, present and future, should be provided here.

The market

What customer groups are targeted? Who is the competition? What is the market? Why would it be interested in that service or product?

Your product or service

What is it? What makes it special or attractive? What does it cost? Are there warranties? How will the product or service be produced and/or distributed? How will the business be promoted? How will the business attract new customers? Is there an in-house sales force? Will the company sell through manufacturers’ representatives, telemarketers, direct mail or the Internet?

Management team and objectives

Who’s running the business and what goals are they required to meet? Is the management team deep or thin? What is its previous experience?

Financial considerations

Financial statements should be done on a cash basis. What are the business’s expenses and revenue sources? The more detail the better. This section should include the exit strategy.

The summary

Summarize the rest of the plan and key issues.

Appendices

Assets and liabilities must be included in this section. Personal financial statements and biographies of the principals also should be included here. Louis P. Stanasolovich, named one of the best financial advisers in America the last four years by Worth magazine, is founder and president of Legend Financial Advisors Inc., a fee-only financial advisory firm located in the North Hills. Legend provides asset management and comprehensive financial planning services to individuals and businesses. Reach him at (412) 635-9210 or via his firm’s Web site at www.legend-financial.com.

Published in Pittsburgh
Monday, 22 July 2002 09:41

Cybersquatters beware

New federal laws are finally putting a serious crimp on those who register Web domain names using the names of companies with big bucks, then try to sell the domains back to the companies. Here’s what you can do legally to stop them. By James R. Carlisle, II

Relief finally has arrived for those besieged by so-called cybersquatters or cyberpirates who seek to make a quick profit by registering and selling Internet domain names that are the same as or similar to famous trademarks or individual names.

On Nov. 29, 1999, President Clinton signed into law the Anticybersquatting Consumer Protection Act as part of the Omnibus Appropriations Act. The Act amends the Trademark Act of 1946 and contains cyberpiracy protections for businesses and individuals. Although the act has been criticized as heavy-handed and providing undue emphasis (and power) to trademark rights, most welcome it as a development in promoting online business.

Business protections

Under the act, a person is liable if he or she, with bad-faith intent to profit from another’s mark, registers, “traffics” or uses a domain name that is:

  • Identical to or confusingly similar to a distinctive mark at the time of registration of the domain name;

  • Confusingly similar to or dilutive of a famous mark at the time of registration of the domain name; or

  • A protected trademark, word or name under the United States Code.

Traffics includes sales, purchases, loans, pledges, licenses, exchanges of currency and any other transfer or receipt in exchange for consideration. A key change to prior trademark law is that mere registration (including “parking” or “warehousing”) of a domain name without use on a Web site can be actionable.

Bad faith

While bad faith is not defined in the act, it provides that, in determining bad faith, a court may consider other intellectual properties in the domain name, including trademark or other intellectual property rights, using another person’s legal name, intent to divert consumers, transferring the domain name for financial gain without having used it in the bona fide offering of goods or services, using false information to obtain the registration, and registering multiple domain names identical or confusingly similar to others.

However, bad faith should not be determined to exist where it was reasonably believed by the alleged cybersquatter that using the domain name was a fair use or was otherwise legal.

Remedies for businesses

Trademark holders can force cybersquatters to relinquish, forfeit, cancel or transfer domain names and can collect civil penalties ranging from $1,000 to $100,000 per domain name. Domain name registries are immune from such penalties. Alleged cybersquatters’ defenses are preserved if using the domain name was a “fair use” or was protected by the First Amendment.

The act applies to all future and existing domain name registrations, but cybersquatting victims may not recover monetary damages for wrongful acts that occurred prior to enactment.

Individual protection

Anyone will be liable who registers, without consent and with the intent of financial gain, a domain name that consists of or is substantially or confusingly similar to another living person’s name. There is an exclusion, however. The registrant, except as otherwise prohibited by law, isn’t liable if the name is registered in good faith and related to a work of authorship under the United States Code and if the registrant is the work’s copyright owner or licensee and intends to sell the name in conjunction with the work.

Individual cyberpiracy protections apply to domain names registered on or after Nov. 29, 1999.

As for remedies for individuals, they may include forfeiting, canceling or transferring the domain name to the individual, in addition to costs and attorneys’ fees.

Post-enactment activity

While the full extent of the effectiveness of the act remains to be seen, several lawsuits have been filed since its passage. One of the main benefits for businesses is the ability to take legal action against a domain name instead of only against individuals or parties who may have limited assets or may be judgment-proof. Lawsuits by the National Football League, Lucent Technologies and Teen magazine were filed shortly after passage of the act.

Individual cyberpiracy protections have had a significant impact. Pirated names for numerous celebrities, including Sharon Stone and Brad Pitt, ceased functioning shortly after the act was passed, and John Tesh and Kenny Rogers each recently filed suit against online firms that had registered their names as domain names. James R. Carlisle, II, is an attorney with Pittsburgh law firm Cohen & Grigsby. Reach him at jcarlisle@cohenlaw.com.

Published in Pittsburgh
Monday, 22 July 2002 09:40

Tapping the well

You’ve finally put the finishing touches on your company’s Web initiative and decided that it would be best to launch a dot-com version of your brick and mortar operations instead of using it to complement your current ventures.

Or perhaps you’ve devised a brilliant plan for a pure dot-com business, but don’t have all the funds to get it past the start-up stage.

Now that you’ve mortgaged your house, hit up friends and family for a couple hundred thousand and tapped your bank accounts, business and credit cards, it’s time to begin the search for venture capital funds.

VCs are investment companies in which investors pump money into one central firm whose job is to find solid business investments. As a company succeeds, the VC firm’s return on investment grows as well. In recent years, traditional VCs have branched off into Internet investments, sinking millions into start-up dot-coms, lured by the riches many entrepreneurs have realized.

Admittedly, it’s become tougher to find VC financing as the great shakeout on the Internet has begun. The need to show actual profits has replaced consistent revenue streams. But there is still more VC money out there than there are solid projects.

Here are three critical factors venture capitalists take into account when considering whether to fund your dot-com project:

The people

Strong management teams are essentially what peopleinvest in with any large project, whether it is Internet related or traditional brick and mortar. As few would argue, the world is full of good ideas. But it takes the right breed of people to execute those ideas and turn a notion into successful reality.

“Everything is moving so quickly now that we’re really looking for people who either have past experience (in dot-coms) or some way that allows them to strike relationships and acquire early customers,” explains Shanti Mittra, a partner at Primus Venture Partners Inc. “That’s really a make or break factor.”

Sometimes, however, it’s not make or break, especially if a VC firm believes it can help the management team, says Tim Biro, president of the Ohio Innovation Fund. That’s where experience in investing projects can come into play. It’s something a firm such as Primus or Ohio Innovation can bring to the table as a value-added extra.

“We look for management that’s already in place, but also a willingness to bring on additional management to help make the investment as successful as possible,” Biro says.

One reason behind that is that VCs generally are active investors. They’ll take an equity stake in the company of anywhere between 5 and 75 percent, depending on the stage of the company and level of investment. And they’ll take at least one seat on the board of directors to help guide the business and protect their investment.

Another reason is that because of the very nature of venture capital investments, VCs don’t receive many guarantees in return for their investment.

“Think about all the trouble you go through to get a mortgage for your house,” says Mittra. “Contrast that to VCs. There is no collateral, the management team can get up and walk away. We’re generally minority owners, so we don’t have much control. We don’t partake in the day-to-day management, so we don’t know what’s going on on a day-to-day basis.

“With that type of risk profile, the odds of getting money are that much tougher.”

There’s one final reason.

“People are passionate about what they have,” Biro says. “That’s important. You can’t succeed if you don’t believe in what you do. But, you also have to recognize your own limitations as a manager. You have to be realistic.”

Innovative technology

“You try to get an assessment of what are the advantages of this technology relative to what’s already out there,” explains Biro. “You have to figure out how much of a sustainable advantage can be built with what you’re investing in. Can somebody build a better mouse trap and ace you out?”

Mittra agrees.

“The question you have to ask yourself is whether there’s been any innovation with the technology being used besides just moving the information into a new medium. What we look for is real innovation and value add to the Internet to allow something that’s never been done before.”

Biro says the technology becomes a major factor when considering how much the investment will cost.

“Technology helps determine how much capital it’s going to take to get you where you want to be and the length of time it will take to get a return on the investment, and what that return will look like,” he says.

And with the rapid changes in technology, you have to move fast. Mittra says beware of developing an initiative with technology that will be outdated by the time it hits the market.

Strength of the plan

Primus Venture Partners sees nearly 1,000 business plans each year. Of those, Mittra estimates the firm invests in 10 or 12 deals.

“We like to think every one we do is an original,” she says. “It’s tough to find all the elements we want. You want original ideas. You want the management team that can make deals quickly. You want the solid technology. We realize we won’t always get all the parts, but things have to come together in order to make the right investment.”

One of the key elements of the plan is whether it lays out a specific road map of how the company’s owners plan to move the business from Point A to Point Z, says Mittra.

“You don’t want it to show they’re competing in an overcrowded space. The plan must be solid and it must allow the business to move quickly,” she says. “A lot of people approach us saying, ‘This is the way we’ve always done it. We just want to put a dot-com after our name.’ That won’t do it today.”

Biro agrees, pointing out that Ohio Innovation sees about 300 business plans a year and takes only a select few from that group.

“You try to choose the winners,” he says. “On average, it’s less than 1 percent. You want to be on Secretariat. But you also want Secretariat to have the best jockey possible. A lot of people tell you to get the best jockey, but if he’s riding a jackass, he’s not going to be a race in the force.

“And you want a good betting office to place your bets because you have to get a return on your investment as well. When it comes to a business plan, it must have all the elements that tell you how that company is going to get where they want to go from here.”

How to reach: Ohio Innovation Fund, (216) 830-1172; Primus Venture Partners, (440) 684-7300

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Published in Cleveland
Monday, 22 July 2002 09:40

Hatching a plan

With all the growth in dot-com companies, taking them from idea to reality has accelerated beyond a conventional business building model.

The proliferation of incubators — literally, gestation organizations that help a fledgling start-up with affordable space, technology, management, financing, lab equipment and other items the business otherwise couldn’t afford — has helped hatch thousands of dot-coms worldwide at speeds unheard of under conventional business models.

Locally, there are several incubators, with more popping up seemingly every day. Here are a few of the better-known ones and a few upstarts you’ll be hearing more from in the future:

Enterprise Development Inc.

Enterprise Development Inc. is the most well-known and well-developed incubator in Northeast Ohio. EDI is the parent organization that manages the Edison Technology Incubator (ETI), BioEnterprise and the Lewis Incubator for Technology (LIFT). The organization houses more than 30 fledgling companies in four locations and provides business assistance to tenants and clients, explains Diann Rucki, EDI president.

ETI is designed for new and emerging technology-based businesses. BioEnterprise provides laboratory and office space for early stage biomedical device, biotechnology and health-care related start-ups. LIFT is aimed at companies with the potential to incorporate technology and know-how developed by NASA’s Glen Research Center. Among EDI’s graduates are Athersys, Gliatech and Netgenics.

“There’s a lot of start-up activity in Northeast Ohio,” Rucki says. “EDI is designed to help nurture companies along by providing support they otherwise would not be able to get.”

Lorain County Community College

Hand it to Lorain County Community College president Roy Church for recognizing where to focus the future of education and acting upon it. LCCC broke ground in April on its new 2,000-square-foot incubator, which will house up to four start-up computer software, Web design and e-commerce companies.

The incubator will leverage LCCC’s educational facilities while complementing the college’s $6 million Engineering, Training and Development Center. It is slated to open in 2001 and is part of LCCC’s comprehensive plan to grow dot-com companies locally, as well as raise the region’s technological awareness by developing an education, business and technology partnership.

Hatchbox Inc.

Working from a collaboration of the legal, accounting, consulting and Web communities, the appropriately named incubator Hatchbox Inc. hung out its shingle in Fairlawn earlier this year. Hatchbox’s goal is to help fledgling e-commerce businesses develop into mature companies through a steady feeding of legal, accounting and marketing expertise.

Founded by Howard Cleveland, owner of Digital Day (formerly Mozes Cleveland & Co.), Hatchbox’s other partners are Arthur Andersen LLP and Benesch, Friedlander, Coplan and Aronoff LLP.

John Carroll University

Not one to be left behind in the progressive world of educational incubators, John Carroll University in March announced plans to join the fray with its own $60 million, 190,000-square-foot science center. Located within that massive building will be a 7,000- to 10,000-square-foot incubator designed as laboratory space for rent by local businesses as a way to lower overhead costs on basic research.

John Carroll management hopes to leverage educational research undertaken by its students and professors, and envisions the incubator as an opportunity to nurture some of those ideas into full-fledged start-up businesses.

How to reach: EDI, (216) 229-9445; LCCC, (800) 995-LCCC; Hatchbox, (330) 528-0029; John Carroll University, (216) 397-1886

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Published in Cleveland