Law, Strategy, Sustainability, Social Entrepreneurship: Insights from Experiential Learning

A customizable experiential learning project allowed students to either (1) interview a professional of their choice or (2) partner with founders in MIT Enterprise Forum CEE to learn how legal astuteness can make-or-break an organization. The project was an opportunity to take ownership of their learning, pursue a passion, network, and take a deeper dive into content or a context—such as international business—than a conventional survey course on legal essentials otherwise allows. We concluded the course by sharing take-aways in person and on an online discussion board.

The insights below build upon those that were derived from our learning partnerships with MIT Enterprise Forum (EF) Central and Eastern Europe (CEE) start-ups by adding “lessons learned” and examples shared during interviews from a wide variety of other professionals:

• several are social entrepreneurs,
• some are attorneys,
• a few work in the context of larger institutions, and
• several are founders, with companies at various stages of maturity.

Interviewees work both domestically and internationally. Several discussed proprietary information or sensitive details, so these take-away lessons are represented in mostly general terms and not all interviewees or their organizations are named.

Here are highlights of the students’ summaries of take-aways from the interviews, blended with the highlights of take-aways from the partnerships with MIT EF CEE start-ups, and distilled down to their essence (as originally published on Babson Blogs):

Law as a lens and tool of strategy

• Alignment of strategy and law is key to seeing opportunities, limiting risk, neutralizing competition, and capturing and protecting value.
• Many noted that their interviewees echoed statements made by guest entrepreneurs in class, including that law is too important (and too costly for many start-ups) to delegate completely to lawyers. The experience of a social entrepreneur, Antwon Brinson, illustrates this reality: as a company that trains and places culinary talent, Culinary Concepts AB has risks and opportunities related to, among other things, food safety and revenue from copyrighted instructional material.
• Building on the last point: students noted that legal astuteness is indispensable for a founder (as noted by guest entrepreneurs visiting our classes on business formation and strategy, intellectual property, contracts, liability, human resources, and more).
• Public law (in the form of statutes and regulations and licenses and charters issued by governments) can create or stifle markets, or else protect competitive positions. Students identified this pattern in the examples of Packen, a freight transportation platform in Colombia, Community Charter School of Cambridge, and Dogcessories, creator of an innovative shock-absorbing leash.
• In evaluating barriers to entry and external threats, some students noted that law and compliance with standards were significant factors, but other important forces were also at work. For example, regulations presented issues in the context of food safety and medical technology (such as solutions based on bacteriophages and use of lasers to identify microorganisms).

Business formation

• The choice of legal entity can enable different approaches to control and oversight, the importance of which was highlighted in the context of firms establishing foreign subsidiaries.
• A foundational question is how to create an entity (a person for legal purposes) that protects the entrepreneur from personal liability, and also serves the founders’ purposes in terms of raising or sharing equity and controlling the business. This was illustrated by the example of Packen, which started as a holding company in Costa Rica, then became an LLC in Miami, then an LLC in Delaware, and finally a C corporation in Delaware. Forming as a C corporation allows Packen to issue incentive stock options that allow employees to defer tax on the equity compensation that they receive, plus offering employees other benefits that are tax-free to the employee and may be tax deductible for the company.
• Options for growth and expansion include forming subsidiaries or franchising or licensing IP.

Intellectual property (IP)

• Depending on agreements (see next heading) and choice of employment relationship, a worker may keep ownership of their creative works, or else their employer may be able to claim exclusive rights to their workers’ IP. Several students noted the importance of NDAs (Non-Disclosure Agreements).
• BioIntelli is a company whose story illustrates several aspects of IP: among them, the limits of NDAs, the need for care with trademarks, the importance of contracts when hiring people to write software code, and how the U.S. Supreme Court’s decisions with regard to copyright can affect the viability of a business model based on content aggregation.
• Legal practitioners at Cengage and a large law firm told their interviewer that, more broadly, it is wise to be cautious when sharing any information, and to diligently document everything in the context of IP. For example, they advised keeping very detailed minutes of meetings that include details that may not seem important in the present moment.
• On the other hand, while acknowledging the need to be careful with sharing information and keep documentation, some students noted that several entrepreneurs (in interviews and during class meetings) have said that a new idea is sometimes less significant than how it is executed, and therefore some interviewees and class guests say that they don’t agonize too much about copycats.
• In one case, the founder of an employer brand management platform prefers to create and license a technology package to other options for growing their business, such as subsidiary formation.
• Equally important to careful draftsmanship of license or franchise agreements is due diligence in choosing one’s partners (a recurring theme highlighted by guest entrepreneurs visiting our classes on business formation and strategy, intellectual property, contracts, liability, human resources, and more).
• In at least one case, a company making a physiotherapy diagnostics device prefers to protect its IP as a trade secret, but its licensing agreements allow for sharing some of its algorithms with clients in the case of its bankruptcy. This example illustrates how contracts can be better tailored if one thinks-through contingencies and identifies motivating interests of parties, as advised in the books Breaking Through Gridlock and Getting to Yes.

Contracts

• At the foundation of tools to limit risk and create value in all the other contexts listed here are enforceable agreements. Just as “war is too important to delegate completely to the generals,” contracts are “too important to delegate completely to the lawyers.”
• Even with the best ideas and talent, the choice of business model can make-or-break a start-up or its expansion into new markets. This is an example of law (contracts) being the essential tool for executing strategy. For example, in the case of a talent acquisition company, they must decide on a platform subscription model or a pay-per-hire service; either way, the strategy is made real through the use of law. This insight (that legal and strategic questions are inseparable in practice) was one of the realizations that the experiential learning experience was intended to provoke.

Liability

• Regardless of organization and context, a business leader is well-advised to think-through various contingencies and consider warnings, disclaimers, warranties, and liability insurance.
• Practitioners Gerald Stack and Steven P. Underwood underscored the wisdom of taking a proactive approach, including paying for appropriate insurance coverage and otherwise resolving disputes prior to escalating to litigation.
• Data privacy laws require businesses to develop procedures on the processing and storage of customers’ information, and this creates a need to ensure that employees receive proper training on implementing such processes and securing protected information.
• Competitive advantage may actually be created by operating in a highly regulated jurisdiction by virtue of having to develop strict processes and a conscientious work culture in, for example, the context of private medical records.

Human resources

• It is never too early to develop an employee handbook and training on operating procedures. This helps to limit uncertainty and liability risks related to employee conduct.
• It was noted that one organization with just two employees, Rivet and Company LLC, still has a zero tolerance policy for discrimination or harassment and strict safety rules and practices.
• In conversations with legal practitioners, it was emphasized how important meticulous documentation is in the context of human resources.
• Some companies consider using arrangements involving independent contractors and subcontractors instead of employees to mitigate the risk of liability.
• However, again, students framed this take-away in the context of generalizable lessons learned from conversations with guest entrepreneurs during our previous class meetings – specifically, that there is no substitute for getting to know your partners well, and for due diligence when hiring people. Here again are links to student take-aways from previous classes on business formation and strategy, intellectual property, contracts, liability, human resources, and more).

Many thanks to the 16 students, 15 class guests, and over 27 partners who helped make this customizable experiential learning project a success, including students Maria Manuela Albir, Arber Cufe, Ryan Finger, Deborah Tristao Gallagher, Daniel Gasperowicz, Cecilia Hermawan, Kate Lagios, Jeffrey Levine, Liz Llorens, Schuyler Lofberg, Stacey Mayers, and Lauren Park, Eddie Rivas, Shannon Donoghue (Singleton), Jess Tessler, and interviewees, including:

• Antwon Brinson, who trains and places culinary talent with Culinary Concepts AB
• Ashley Finger
• David Hines, BioIntelli
• Carrie French, Cengage
• Emma Stellman, Community Charter School of Cambridge
• David & Joshua Rivet, Rivet & Company
• Gerald Stack and Steven P. Underwood
• Steven Brandwayn and Jedidiah Horne of Packen, a freight transportation platform in Colombia

And thanks again to the MIT EF CEE start-up founders and participants who likewise engaged as learning partners, including Adam Wozniak, Adrian Augustyniak, Barbara Zych, Klaudia Szklarczyk, Lukasz Skryplonek, Michal Wendeker, Pawel Kwiatkowski, Piotr Smolen, Michal Wronecki, and Tomasz Florczak, whose companies include:

• www.aisens.co (mentioned above: the company making a physiotherapy diagnostics device)
• www.bioavlee.com (mentioned above: the company using of lasers to identify microorganisms)
• www.challengerocket.com (mentioned above: a talent acquisition company)
• www.dogcessories.eu (mentioned above: the creator of an innovative shock-absorbing leash)
• www.ebnavi.com (mentioned above: an employer brand management platform)
• www.intelliseq.pl
• www.phagearmour.com (mentioned above: the company using bacteriophages)
• www.symmetrical.ai
• www.versprodukcja.com

And thank you one more time to our class guests, including:

On business formation and strategy:

• Anna Barnacka, CEO, Founder at MindMics, Inc.
• Jake Vaillancourt, Co-Founder & Vice President of Waste Hub & Partner at 10X Engineered Materials

On intellectual property:

• Howard Susser, Chair of Intellectual Property Litigation, Burns & Levinson LLP

On contracts:

• Eagle Wu, Founder of Vinci Virtual Reality (current Babson student)
• Karim El-Gamal (with Michael Kasseris, co-founder of Rail Trail & New City Microcreamery & Karmichael Holdings (Babson MBA alumni)

On liability:

• Jason Cipriano, Global Head of Supplier Relationship Management (SRM/VM) & Vice President, Sourcing and Procurement, State Street

On human resources:

• Brandale Randolph, Founder CEO of The 1854 Cycling Company
• Danielle Goldman, Co-Founder and Executive Director at Open Avenues
• Kevin Loos, Co-Founder & VP of Sales and Operations, CrowdComfort (Babson MBA alumnus)

On the day of discussing experiential learning take-aways:

• “Bogy” (Boguslawa) Cimoszko Skowronski, Co-Founder of MIT Enterprise Forum CEE and CEO, Capital Solutions proAlfa

On the day of our course wrap-up:

• Allison (Abrams) Yee, Founder + CEO at UpNext | Retail Reimagined
• Amelia Adams, President at Adams Advisors LLC (Babson undergrad alumna)
• Asheen Phansey, Babson Director of Sustainability & President of Phancey Consulting (Babson evening MBA alumnus)
• Bianca Jordan, founder of Brazen Legal (CWEL Mentor at Babson)