Chris Hood  0:00  
Hey everyone, thanks for listening. Over my career I've had the privilege of being a part of some fascinating startups, a few that were extremely successful, and a few not so much, which is pretty good odds considering 90% of startups fail. In 2023. There are almost 73,000 startups in the United States, each with their own unique blend of ideas, culture and legal support. And lucky for us out of 1.3 million lawyers in the United States. For this episode, we have two of them. Joining me today is Tom Biscaia, the game attorney and Anthony Millan founder and co chair of next dot law to discuss legal challenges with the rapid growth of technology, and how to empower startups to be successful. To support the show, visit ChrisHood.com/show. Subscribe to the show on your favorite podcast platform. Follow us on social media, or you can email me directly show@chrishood.com. I'm Chris Hood, and let's get connected.

Voice Over  1:05  
Connecting. Access granted. It's The Chris Hood Digital Show where global business and technology leaders meet to discuss strategy, innovation and digital acceleration. Five, four, three, two, one. Your digital evolution starts now. Here's your host, Chris Hood.

Chris Hood  1:37  
Welcome to the show. This is a lengthy topic today. So I want to get right into it and introduce our guests. Tom, would you mind introducing yourself and a little bit about your background?

Tom Buscaglia  1:47  
My name is Tom Buscaglia. I'm known in the industry as The Game Attorney. I've been representing independent game developers since 1991. Or I've represented over 200 independence. Some of my clients need mentoring on a constant basis. Anyway, that's the but that's what I do. And I'm sort of outside general counsel for my clients.

Chris Hood  2:06  
Anthony, would you mind introducing yourself?

Anthony Millin  2:08  
Sure. Great to be here today with you, Chris. My name is Anthony Millin. I have spent the last 25 years in the startup ecosystem. As a serial entrepreneur. I've co founded several VC and private equity backed companies. I've also been a venture partner in a seed stage venture capital fund, and have spent a lot of time as well as a startup attorney, working with startup and emerging growth companies. And I'm currently the founder and co chair of an innovative new model for delivering legal services to start up and emerging growth companies that came from my experience being on the entrepreneurial side consuming those services. And looking at the way I would have wanted legal services to be delivered as an entrepreneur.

Chris Hood  2:58  
Do you get in to the advisory of the organization at all?

Anthony Millin  3:02  
Yes, so we spend a lot of time working with startups on guiding them through our underlying mission at Next. And the next.law is, which is part of Shulman Rogers is really enabling and empowering startup success. So we work, a lot of the time that we spend is spent guiding, educating, working on strategy working on decisions, in addition to the actual legal work that's being done with that the two are very integrated. But the advisory side and guiding is probably the biggest part of what we do.

Chris Hood  3:40  
When you compare, say, a gaming developer or an indie game studio with some of the other types of startups that are out there now in the tech space, do you see similarities or differences in the work that you're doing?

Tom Buscaglia  3:55  
I think there's a huge difference in in a lot, a lot of times in the culture, most traditional startups are about making money, coming up with a business idea that's maybe blue ocean that's going to change things, and then they will be able to monetize that in a meaningful way. And I what I find with Indies is they love games, and they just want to make games. So I think it's more akin to say, the music industry in the 50s and 60s, or even the music industry today, where you've got these garage bands who are just all about passion, with not a lot of brands that are getting taken advantage of constantly and sort of that's those are the people that I protect and try to help. So there. I think there's a qualitative difference there. They're not near as business savvy, mostly, you know, I mean, there are the exceptions. But a lot of the clients that I've dealt with, they just needed that other person who was a business person that wasn't there to exploit them, but it was there to help them exploit their product. And I think that's, it's kind of if I could say there's a missing piece in the industry, we probably need more people like that that are good business people. that are genuine about wanting to protect their company,

Chris Hood  5:03  
you mentioned that you spent some time mentoring some of your clients in what areas are you specifically spending time with them,

Tom Buscaglia  5:10  
it all starts with clean up your act, you can't sell what you don't own, a lot of it is initially making sure that they've properly secured their employees that their intellectual property rights are all in line, they're not exceeding their reach in a lot of ways. And then I also will help them bring their game to market come up with a marketing strategy, I'll introduce them to people that I know in the industry, which after those 30 plus years, I guess it's a lot of people, you know, and that just that kind of thing, when you're, you're running a small team, say anywhere from, you know, six to 20 people, and you're the head of the team, and you're trying to make decisions that are going to impact everyone. They don't have anyone to talk to about what the what the problems that they're have to deal with on a business level. And I think having an outside counsel, just to sound stuff off of, if nothing else, is, is quite a valuable thing. Usually, in the industry, you know, we're dealing with third party funding. And if it's a startup, you have very little leverage in the negotiations. So it's almost take whatever you can get. My clients certainly think that I don't, you know, that's constant struggle, getting them to focus on what the deal they need, as opposed to trying to keep the studio alive.

Anthony Millin  6:24  
The culture of an organization is critical to the growth of an organization, you can't build an execute and grow, particularly from an early stage if you're not building, building the right culture. So we we often talk to clients and advise them around that, but we see we see culture, as a cornerstone, and a foundation for building and scaling. After that, I think, you know, what becomes very hard is when you start with a great culture that you've been nurturing and building from the beginning, you grow to a certain size, the challenge becomes how to maintain it. And how to, to not lose that core of what kind of made you special, your own special sauce, in terms of the uniqueness of the of the organization that you're building, I think it's very important.

Chris Hood  7:22  
And, Tom, you were just talking about negotiations, I think this is one of the big things inside of all startups, whether it's an indie studio, you get your first opportunity to sell a game and they get a contract handed to them, or even on a startup, you get your first opportunity to raise funding, what are some of the things that entrepreneurs who may be listening to this have to keep in mind when either raising money or closing a deal,

Tom Buscaglia  7:46  
I think being able to get a deep understanding of the dynamics of a specific transaction, in terms of the pros and cons in both directions, you know, understanding the other side, what their desires are what they want. And then making sure that that aligns in large part with what the startup is looking for, with the studios looking for. A lot of times i The other thing I think is in this is really critical that I see in the industry. And that is, if you're a startup and you're looking for funding, that's a full time job, that's all you're gonna do. Unfortunately, it's really hard to run your business while you're hunting. You know, and I've seen, I've seen people with what I thought were very solid ideas that could have been brought to market. And they spent those two years looking for funding instead of building their company. And I, from my point of view, if they had just gone forward and started selling their product, they would have done much better than trying to get enough money so they could ramp up to sell their product. You know, sometimes it's easier to just go ahead and do it. And I'll be frank, most of my clients are not looking for funding, mostly because when you're starting up, you don't have the valuation be able to raise the kind of money you need, without basically giving away the company. And when you're to the point where you don't have to give away the company, you probably don't need the money.

Anthony Millin  9:09  
On my side. You know, we do a lot of work with companies raising capital. And I think education becomes core for the founder you especially first time founders haven't been through this process before and they're negotiating with investors who this is all they do. And so working with somebody who can really first of all educate you as to what are the core elements that you're going to be negotiating about? So, you know, to us there are three core levers or areas that a founder needs to be aware of when they're negotiating around a financing. The first one which is we found a spin most of the time is really around valuation whether in a safer convertible note it's a cap or whether In a priced round, it's an actual valuation. But often founders spend almost all the time thinking just on that element. And there are important things to know when you're dealing with valuation. In terms of what the whether the investors giving you something on a pre or post money are fully diluted basis. So it's important to know what what you're talking about. But then there are two other areas where investors spend a lot of their time. And founders don't often realize, but there's a lot of rights and preferences that get negotiated. And those rights and preferences can have a real impact on how money flows later on rights, people have to participate in future rounds, whether an investor gets to get the money back and then sharing the proceeds of the sale. And so there's this list of rights and preferences, that's the second. And then the third one that you have to focus on is older protective provisions. So you may think you're selling 10% of your company, you control the board of directors, because you have two board seats to the investors one but these protective provisions that get negotiated, often give significant veto rights to the investors around really core parts of of operating a company. And so whether you end up agreeing to some of them or not, or not, at least understanding what's going on around those three areas is really important in a negotiation for financing.

Tom Buscaglia  11:33  
It's funny because I get the similar model dynamic. Most of the kind of most negotiations I've involved with are either with like rev share funding, as opposed to traditional funding, or mostly publisher funding of projects where it's a, it's a single one off issues, such as IP ownership, and that go back and forth. But the dynamic is still the same. What you've got is you've got a studio, that I actually have told people, I would have been smarter for me to go after working for publishers instead of developers because publishers do 20 deals a year and developers do one deal every three years. But you see it all the time where you get a very experienced team on the other side, sometimes to the to the level of and I'm sure you see this with VC funders, arrogance, right, and you're dealing with this corporate arrogance with Well, we have the money, so you don't have anything. And my feeling is you know, you got a company that sells games, and we have a game you want. All you have is money. You know, if all they have is money, and they need games to sell, and you have a game they need to sell, maybe you have more leverage than you think. The other thing I get with rookies, and I suspect you may get this as they go into negotiations, trying to think of what the other side wants, and making sure that they don't step on any toes in the negotiation, which is a really bad way to negotiate. You know, you have to negotiate you negotiate your deal, not their deal.

Anthony Millin  12:58  
Yeah, and I think, Tom, along the lines of what you were, you know, you were saying there, in terms of the whether it's the developed game developers or other entrepreneurs, is looking at doing due diligence on the investor realizing that when you take money from an from one of these investors, this is a long term partnership. And businesses don't always and most often don't follow a straight trajectory up there are ups and their downs, there are cycles in your business, there are cycles in the market, and who you're partnered with, from a capital point of view, is going to play a really critical role in terms of how this business does through those ups and downs. And so sometimes the founders are, don't realize the like Tom said, if they have a great company, a great product or a great game, they don't realize that they they have the power to make sure they're aligned to their investors that the culturally there is a fit, they should interview CEOs of other companies who've invested who've had investments from that investor. And they should, they should also spend time speaking to companies who did well and companies that didn't do well. So that you see how the investors act on both sides of that.

Tom Buscaglia  14:30  
I was talking about iteration in game development and how that's how great games are made by iterating. On I know that in in the VC culture, it often happens that somebody has a technology that they're trying to productize and all of a sudden, halfway through those first two years, they realize that they need to change their market readers, they need to pivot the entire the entire mission, right? And how is that handled with in terms of the initial investors? Do you have to go back to them and say, Hey, we've changed our mind. We're not going to make this we're going to make that, how does that go? Is that do you have to renegotiate the terms? Or are you pretty much once they give you the money, you can do what you want unless they unless you can't?

Anthony Millin  15:08  
It depends on what is negotiated with the investor. So you know, when you ask about one of the most important things to do, after you bring capital in, that is stay very close, Lee, you know, in terms of keeping your investors informed, you should be they should know, frequently what's going on with the business so that if you start running into trouble, and you need to pivot, they're part of that conversation. You know, they're part of the brainstorming, they want you to succeed, they have capital in the business. And so if you've been keeping people informed with you all the way through, they, they're with you, if you need to pivot. If you suddenly call an investor and say product didn't work, no one's buying it, we've got a two weeks left of capital, what can you do to help me that is a crisis situation that you never want to find yourself in. Now, as far as legally, there are clauses where we talked about those protective provisions, there are clauses that can be negotiated by investors where they say, you cannot substantially change the nature of the business without our consent. So if you are going to be doing that, and there is a clause that in there, there is language that could be built in by investors to protect the fact that they thought they were investing in a software as a service in a consumer oriented or b2b business. And suddenly you're in climate, building a hardware product that you know that that on their money that that kind of thing is built in. But I would say the best advice is treat investors like your partners and keep them informed and have them part of the conversation so that if you need to pivot, and many companies, like Tom said, ended up pivoting, everyone is there. And often, if you've been with investors all the way through in that part of the decision, they may even put in some additional capital to help you through that pivot leading up to your next big raise.

Chris Hood  17:18  
One of the biggest disruptors is technology. And obviously, we can't go much further into this conversation while talking about how AI is drastically disrupting businesses, game development, and even law.

Tom Buscaglia  17:34  
I have a question for Anthony, do you think we're gonna have jobs in 10 years? Or do you think it's five years?

Anthony Millin  17:39  
Yeah, I think jobs are gonna be different. And I think that the ability that there is, like all technology that comes in, I think that you have to kind of understand it, understand where its strengths are, understand where it's going to be better than what a person could do, understand where its impact is going to be. And then understand how to leverage that technology to do what you do, or parts of what you do better. So I think if you blind to it or ignore it, it's going to disrupt and take, you know, take, like you said, take away big parts of what lawyers do, will will be replaced by technology. But that just means that the industry is going to evolve, I don't think that you're going to necessarily have no lawyers. I think that the way legal firms practice and what they spend their time on in terms of how they work with clients is going to evolve with the technology.

Tom Buscaglia  18:48  
Yeah, I suspect it'll hit paralegals harder than it hits lawyers. Because somebody has to have lunch with the client. No, but nobody wants to go to lunch with an AI. So there you go. The most useless parts of our job are going to be left and we'll be proofreading for the robots. I just love it. I think it's amazing. I was doing a Response to Office Action to trademark the other day and I thought I should ask GPT chat to try to do this. I chickened out and wrote it myself. But it's it's a thing. You know, I look at how do i How is it that I construct when I'm negotiating a publishing deal. And what I do is I look back at the 200 or so that I've done right. And I think of all the times that something went wrong, and it affected the progress or the ultimate result for my client. And then I try to make sure that I build that back into the contract. That's how some companies contracts get so ridiculously ugly, because they just add stuff without taking it out. You do that? And then I started to think well, let's see if I was an AI and I could instantaneously instantaneously access say 10,000 Publisher agreements. And then the lawyer told me what they want out of this. There's the lawyers job, tell the AI what you want. But you could do that with ordinary language and say I want this provision that provision this provision, I want this law to apply, I want binding arbitration, or I want court, you know, whatever. It's all different variables that we put in our contracts, right, both on the front end and the boilerplate on the back end. And then it just writes it based on every every other contract that's ever been written in that field. And then I proofread it. It sounds nice. It's kind of way, I'd like to work that way. And I just as soon have somebody else do all the heavy lifting. But at the same time, I don't know. The AI we're seeing now is as impressive as it is, is in its infancy. And the more we use it, and the more we adapt to it, it's going to adapt to us. I think it'll be a wonderful, hopefully a wonderful servant and not an evil Master.

Anthony Millin  20:48  
Yeah, I mean, it's interesting. I think in the legal field, I was just at a big national industry conference, you get a sense that people realize we're at the beginning of kind of a complete paradigm shift. This is not like a small step forward. This is the beginning of something pretty fundamental to the legal industry. They had a session on chat, GBT and on general AI. And they ended up having to open up like multiple ballrooms just to fit everybody in who wanted to attend that one session that just overflowed and then they filled another room and that overflowed. So I think people realize, and people are starting to really try to under knowing that will impact trying to understand its impact.

Chris Hood  21:38  
Elon Musk came out with several other tech executives saying that we should put a pause on the development of AI because there's not enough ground work or rules put in place to govern us around AI. And I think that gets into some of these legal battles. It is the wild wild west currently, just like the internet was when it first came out. And it took several years for there to be some guidelines as to how we were going to structure it. Unfortunately, AI is moving at such a rapid pace, that we don't have two or three years to try to figure out how we're going to govern this.

Anthony Millin  22:18  
If you look at the internet, Chris, which you brought up as an example, we're still trying to figure out decades later how to regulate components of the internet. I mean, they've still tremendous concern of a certain aspects of social media, and regulations that should have been put into place. So you know, feels like regulations are nevermind years, but decades behind where technology's going and technology is becoming more powerful. So, you know, if you look at just the overall power and impact of where AI can take you, the fact that regulations, governments don't move fast enough to get in front of something that once the genies out of the bottle you can put back in to have certain ground rules and regulations in front, I think it's the same with genetic engineering on on that front. In terms of going in and being able to alter genes, you know, often people and technology just outstrips the regulatory environment, and then you're, you have intended consequences of that technology. And then you have unintended consequences with significant negative impact of new technologies. And that is an underlying challenge that's been going on for a long time, and may even be more challenging with the power of AI.

Tom Buscaglia  23:50  
This reminds me of the 90s, when I was out at the Institute for long technology at Berkeley, there was a consolidation of people from Oracle and Stanford and Berkeley. And it was all about law and technology. This was in the mid 90s. And the debate then was, on one side, you had the traditional government types who were saying, how do we regulate the internet? And on the other side, you had free thinking guys, electric Frontier Foundation, and those guys who were saying, Should we regulate the internet, which are two very different questions. And I think we have the same thing with AI. First of all, I don't think that humans are going to be fast enough to put it back in the bottle, it's already out. And we can say, all this scrupulous people shouldn't be able to do this and all the unscrupulous people are going to do it anyway. You know, how do you punish an AI? And once it's out, its out? I think we need to change the way we look at the world. Yes, all its international borders are becoming more and more meaningless. Certainly with AI. They're going to be completely meaningless. I don't think governments can do it. Frankly, I think technology is way more powerful than any government right now. Anyway,

Chris Hood  25:00  
You know, it's not just borders between countries as you're talking about. But what we're also seeing is that companies are becoming borderless. And I agree with you, I think it's fascinating to see the growth in the rapidness of AI, but even other areas that are fueling AI like data. And Anthony, as you mentioned, the impact that it's having on social media, and just security across the world, in terms of technology, it's really blowing up and going to be incredibly challenging to maintain my who knows where we're going to be by the end of this year, let alone next year. Thank you both for spending time with us today and talking about startups and technology. It's been a great conversation. 

Anthony Millin  25:50  
Great. Thank you, Chris. And thank you, Tom.

Tom Buscaglia  25:52  
Yeah, this was wonderful, Chris, I appreciate you offering me the opportunity to be here.

Chris Hood  25:56  
And of course, thanks to all of you who are listening. If you liked what you heard, please subscribe to the show on your favorite podcast platform. And please leave a review. Your feedback helps us improve, grow and reach a wider audience. If you have questions, comments or ideas for the show. You can connect with us throughout social media or online at Chris hood show, or crypto.com. And please share this episode with your friends, family colleagues, or anyone else looking to grow their business and start their digital evolution. Until next week, take care and stay connected