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Gregory L. Seltzer concentrates his practice on public and private merger and acquisition transactions, including private equity and venture capital financing transactions, securities offerings, and spin-out transactions. He represents entrepreneurs, startups and emerging companies in cutting-edge industries, including SaaS, virtual currency, biotech, mobile applications, and cloud-based technology, among others. He also represents venture capital firms, family office investors, and angel investors.

Q. What advice do you have for entrepreneurs who are interested in kicking off a retail or fashion startup? 

A. An entrepreneur should determine whether the business will be a “product” or “service” business model. Or, perhaps it’s a “license” or “branding” model—these lean toward the “service” model. The type of business model dictates capital needs. More capital is needed for a product business that requires manufacturing, while less capital is needed for a service or branded license deal. 

Q. Identify a unique issue that retail or fashion startups face.

A. Retail businesses face the unique issue of “bricks or no bricks.” Will the retail startup have a physical location or an e-commerce platform? Both models have risks. The physical retail location has real estate costs and long-term lease obligations. The e-commerce platform has low barriers to entry and an uncertain tax environment. For startups that are software or SaaS businesses targeting retail and fashion, I suggest those businesses characterize themselves as software or SaaS, as the multiples and investor outlook are more positive and aggressive.

Q. In your practice, what types of investors do you see investing in retail or fashion startups? What advice would you give an investor considering an investment in a retail or fashion startup?

A. Investors should scrutinize the intellectual property of the startup and prioritize IP due diligence—not just in terms of whether the IP of the startup is owned and protected, but also the investor must ensure that the IP does not infringe the brand or marks of third parties.

Q. During the bootstrapping phase, ventures tend to spend little money for external advisors. In your opinion, when should a company engage an external advisor, even if they are bootstrapping?

A. Startups should have sophisticated legal counsel from the outset. Bootstrapping is critical, and startups should seek investment from investors only when they can no longer bootstrap. Startups should engage an advisor with expertise and experience in working with startups, as those advisors and lawyers will know how to structure fee arrangements that startups can tolerate. Startups should not bootstrap on legal services—an experienced advisor is required from the outset to structure formation and initial founder shares in a tax efficient and sound manner. 

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