As exemplified by the inaugural Health Wildcatters class announced last month, health technology startups are booming in North Texas. Money is flowing, companies are moving up from Austin, and entrepreneurs are working together to raise the tech profile of the area.
When laying the groundwork for your startup, one of the earliest decisions that should be made is whether to file as an LLC or a corporation, according to Dallas-based business lawyer Kevin Vela. While an LLC is easier to work with—in terms of paperwork and financial liability—filing as a corporation is the best route for those looking to build upon an idea worth selling, or with IPO options in the future, he said.
Vela was one of three panelists who participated in an open forum hosted by Health 2.0 to discuss the rigors and process of launching tech and health startups. Health 2.0 is the local chapter of a widespread movement dedicated to bridging the gap between health and technology. Thursday evening’s panel also included physician and entreprenuer Clay Heighten and Mike Barlett, president of Dallas-based Vital Art and Science.
Another piece of advice Vela threw to the crowd was to plan for the future when you have multiple founders of a company.
“People plan for the marriage, but nobody ever plans divorce,” Vela said.
His advice was to go over all of the legal possibilities with all parties involved, especially when there is intellectual property involved. Vela also suggested that intellectual property be signed over to the company and patents be filed immediately. With the different laws surrounding IP and the possibility of anything happening, decisions surrounding its ownership and use are best made early on.
The crowd of about 80 people listened intently to the conversation happening in the front of the room, as many of them came with start-up ideas and from different backgrounds. While the discussion only lasted about an hour, IT consultant Nabil Qawasmi said the most revealing bit of information he gathered was the lack of importance a business plan carried in the early stages.
“Traditionally, I thought that before you could get funding you needed a business plan,” he said. “It was interesting to hear that in this day and age, business plans aren’t that important. It makes it easier for somebody like me to start up with an idea.”
The panelists agreed that while a business plan is important to investors and a great tool to organize a company’s structure, it’s not nearly as important as a solid business pitch to an investor.
Bartlett also brought up the importance of receiving outside consulting on a new start-up idea.
“What you have to do is get feedback,” he said. “It’s too easy to believe your own story.”
Depending on the field a startup is jumping into, Bartlett added, there will be regulations to abide by before even applying for licensing from organizations like the FDA. Bartlett said being aware of these regulations is imperative, along with knowing who the end customer will be. Whether it be a larger corporation buying the company in the future or an actual consumer, Bartlett said, all end customers must be taken into account.
After the Q&A portion of the evening ended, panelists walked into the crowd and the networking portion of the evening began. Dallas Health 2.0 coordinator Mike Walsh stressed that the networking was just as important as the panel discussion.
“Knowledge is good to have, but contacts are 1,000 times more important; that’s what this is really about,” he said. “This is fine, to hear some of these things, but to be able to actually meet these people and grab lunch or coffee with them and discuss their business or what your idea is, that’s where the value of this really comes out.”
William Johnson is a D CEO intern.