S1 E46 Legal Issues When Pitching Your Business to Friends, Family & Investors with Wayne Carroll and David Blackledge

Fraud can sneak up on people, it may seem like a small deception at first or the easy way out, but the deception will grow until it is too big to hide. Theranos Scandal - The company aimed to do multiple blood tests with one drop of blood - The company took orders but was sending them out to other labs instead of using its own equipment - Company had a lot of money but technology never worked - Dream never realized - The founder went to jail because she failed to let investors know that the machine was not working as promised - Importance of informing investors immediately when things are not as stated or expected to avoid legal trouble - Legal fraud involves knowingly sharing false information - CEO should have communicated the machine's issues to investors as soon as she knew Seeking Funding and Securities Compliance - Small businesses and startups often seek funding from angel investors - Angel investors evaluate the potential for investment through pitch decks - Crucial for businesses to consult securities attorneys to ensure compliance with regulations - Accepting money before consulting an attorney can make it difficult to back out of of the legal problems when regulations are not followed. - Entrepreneurs should not present business ideas for investment to anyone before consulting a securities attorney - Even friends and family members need proper documentation when investing - SEC imposes fines on fraudulent practices - Two types of investors: accredited and unaccredited - Accredited investors are considered sophisticated business people and require lesser documentation, but still receive formal documentation SEC and Ponzi Schemes - SEC was formed and rules were put in effect in 1933 and 1934 after the Great Crash - Ponzi scheme involves taking new investors' money to pay off previous investors' returns - Bernie Madoff involved in a Ponzi scheme and falsified records - SEC exists to protect investors. Breach of trust has serious consequences for offenders. Special Guest: David Blackledge. David focuses his practice on startup and emerging businesses, particularly in various technology markets. This includes counseling business owners from entity formation through raising capital and company growth and on business associations with other partnerships, distributors, licensees, and general business relationships. David spent the first thirty years of his professional career in sales and operations management of high-technology startups giving him a unique perspective on advising business owners, investors, and others in the business world. David is an active investor in multiple angel groups and an Adjunct Professor in Law and Ethics at Grand Canyon University, as well as a mentor and judge in many Arizona-based business competitions. Website: davismiles.com/attorney/david-blackledge/ LinkedIn: linkedin.com/in/david-blackledge-7829a23 HOST: Wayne Carroll is a highly experienced intellectual property lawyer with over 15 years of experience. He holds a Juris Doctor degree with a concentration in Intellectual Property Law from Suffolk University Law School, as well as an undergraduate degree in Electronic Engineering Technology from DeVry University. Wayne is the CEO and Attorney at Inspired Idea Solutions, LLC, a firm he founded in 2013, where he specializes in patent strategy, patent prosecution, trademark strategy and registration, and copyright litigation. Wayne can be reached at 480-741-2440 or [email protected]. You can also connect with Wayne on LinkedIn. Schedule an appointment with Wayne Carroll for a strategy session on protecting and leveraging your intellectual property.