The Expanding Role of Venture Capital
Another consideration is the type of buyout a prospective startup is considering. Money is rarely given with no strings attached. The type of funding desired, along with the type of buyout strategy, can determine how the company is set up. If an outright sale of the technology is planned, a simple build and sell strategy works best. But it is still advisable to have at least some paper trail outlining share distribution in order to avoid heartache down the road.
In cases where the aim is to build a company, it makes sense to define and formalize a corporate structure. This is especially important when it comes time to sell. The acquiring company is generally interested in the product or service that the startup has to offer and often has little use for the existing corporate structure. But for those selling the business, it’s advisable as part of the sale to split the assets off from the original corporation and hold onto the corporate structure itself for a few years. This helps protect against any liability that might creep in during the following few years.
There are a number of proposed startups that could have tremendous implications for the retail model. These include broadcasting companies, LCD panel manufacturers and music distribution services. As an example, look at the vast upheaval in the LCD markets. These companies built their reputations on product quality and competitive pricing, causing a severed decline in margins for all but the top-tier players. The same can be said about flash-memory entrants and other CE categories.