Tovala: A Start-Up Story

I defended class actions and multidistrict litigation at a huge firm for a couple of decades.

And now I’ve handled litigation, compliance, and employment law at a Fortune 250 company for the last six years.

In short, I don’t know anything about start-up companies. Come to think of it, I don’t even know if you hyphenate the word “start-up.” (I just checked; on-line dictionaries seem split on the subject.)

But I learned something about a start-up company over the past year, and I’m sharing it with you here today. This isn’t exactly law, but it’s nearby (and it’s interesting — to me, at least — and it does someone a favor, as you’ll understand momentarily).

A student at The University of Chicago Booth School of Business decided that he had no time, but he wanted to eat healthful foods. He needed (1) fresh food to arrive at the door, already seasoned and ready to cook, and (2) a contraption that would cook the food on its own. That product didn’t exist; he was a business student. Can you feel a start-up company coming?

It turns out that this idea — having food (1) prepared, (2) delivered to your door, and (3) cooked basically by itself — is too complex. If you’re a rookie entrepreneur, then you’ll spook angel investors if you try to tackle three fields simultaneously — food preparation, food distribution, and technology. You’ll have to limit yourself to just one field.

So the student pared things down: He arranged for a company that specializes in food preparation to prepare food — meals consisting of a protein, a starch, and a vegetable — to the recipes his chefs specified. He spoke to Peapod about delivering that food to your door. (He also spoke to Marianos about selling the food from its stores, to satisfy people who still like to shop the old-fashioned way.) Once he’d plucked those two fields — food preparation and delivery — out of his life, his start-up company was sufficiently simple: He’d design a contraption that could broil, bake, convection heat, and steam food in any chosen order, so the contraption could cook the foods. Voila! Once the company focused on technology alone, angel investors would at least consider kicking in some dough.

But how will the contraption cook meals on its own?

Funny you should ask.

The meal’s package has a bar code on it. The contraption scans the bar code, consults with the cloud, and the cloud tells the contraption which heating method to use in what order (and at what temperature). And that’s a new invention — having the contraption talk to the cloud this way — that’s patentable, protecting your new business from a certain amount of competition.

The student first asked a Chinese company to design the contraption. Distance proved too much of an obstacle; he later brought Midwestern engineers onto the team.

With a prototype on hand, the student could start to compete for capital. He entered the New Venture Challenge — at which Chicago students compete for capital — and won. That’s $70,000 in the bank and instant credibility with others.

He next won a coveted spot at Y Combinator — an outfit that I’d never before heard of, presumably because I’m a lawyer, not a venture capitalist. Y Combinator invests $120K in about 100 start-up companies, invites the entrepreneurs to its campus for three months, and helps the companies get into shape and refine their pitches. At the end of the three months, the 100 start-ups each make very short pitches to an audience of select venture capital investors. (Think about the opportunity this creates: The entrepreneurs get to make their pitches to a room full of potential investors. And the potential investors get to sit in a room, watch a parade of pre-screened, plausible start-up companies make their pitches, and then invest in the companies of their choice. That might be the epitome of a win-win situation.) This year’s presentations are scheduled to occur next week.

Meanwhile, you try to create some buzz for your product. You ask famous chefs to work with you to create recipes. You lend your contraption to “thought leaders” in the food world, hoping that they’ll use your device, enjoy your food, and rave about the product to others.

You figure out how to survive in an age of social media. In this case, you tell folks who buy your product that they can create their own recipes. Once the company tests (and approves) the recipes, the company uploads those recipes to the cloud and starts distributing the new meals. The user who invented the recipe gets not just fame, but fortune: The inventor will receive royalty payments on sales of the meal. How’s that for creating an online community and ensuring that people will tell their friends about your product?

Then, you launch your product. This company launched last week, with a Kickstarter campaign. Kickstarter is another great idea, but one I’d heard of. It’s an online platform that lets start-up companies and creative folks make an online pitch for support. Millions of people visit the website, look at the proposals, and decide which ones to support, by contributing money, ordering (or pre-ordering) products, or otherwise. Although I’m sure Kickstarter has competitors, Kickstarter itself seems to have taken the world by storm, and many companies launching consumer products start their campaigns there.

Anyway, here’s a link to the Kickstarter campaign for the product I’ve been describing, so you can look for yourself.

I bet that what I’ve just written is pretty basic stuff to entrepreneurs or lawyers who advise start-up companies. But I, in my ignorance, found the story pretty interesting. And the entrepreneur is a friend of my daughter’s, so I figured I’d share news of the product here. (Clever readers had probably already guessed this; I told you years ago that my daughter was entering Chicago Business School.)

So that’s my tangent for this week.

And even if I didn’t exactly write about being an in-house lawyer, maybe I’ve done you a favor. Maybe you have more money than time, and you’d like healthful food to arrive at your door and cook itself. Just in case, I’ll note in closing that a start-up company must also create both an advertising tagline and a website:

Tovala: Live well; eat better.

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Mark Herrmann is Vice President and Deputy General Counsel – Litigation and Employment at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at [email protected].