Ernest W Grumbles III is a startup-focused IP attorney with the local firm Merchant & Gould. Ernest helps entrepreneurs launch new tech (clean/green/IT/med tech) companies and has been known to rumble in the courtroom. He is one of the founders of MOJO/Minnesota – a collective promoting innovation policy and community in Minnesota. He also blogs for the Star Tribune, hosts his own IP podcasts and plays in a Roots/ Americana/ Jazz Band called The New Nationals. Here is a link to his recent “IP Crash Course for Startups” held at CoCo MSP this past Wednesday.
Jeff: Ernest Grumbles – here we are; thanks for taking the time to sit down and chat with TECHdotMN, we appreciate it very much.
Ernest: Happy to.
Jeff: I guess to start off with why don’t you tell us a little bit about who you are and what you do?
Ernest: Well, I’m a native Texan who’s freezing in Minnesota right now. I’m intellectual property attorney here in town. Like to work with startups, playing a little guitar in the side. I’ve got a couple of kids. That keeps me busy.
Jeff: Sure. Sounds like it. Touching on startups, what is it about startups that you like and that appeals to you?
Ernest: Well, you know like I mentioned I play guitar and I like doing creative things myself, and I found that I’ve been practicing law since 1995 and have got on work a lot of different types of litigation matters so a lot of business development, business council matters. I found that when you get to work with startups you get closer, you get closest really, to the creativity that drives a lot of new business and that’s fun. Businesses of that stage are characterized by a lot of enthusiasm, a lot of energy. People are living their dreams and they try to come up with something new and something that’s exciting. And it’s great to tap into that energy. That’s the fun thing about what I like to work on, you know,and a good kind of global portfolio counseling in term of IP strategies and how that meshes with that early stage business goals and I get to leverage that kind of range of stuff that I enjoy working on with early stage companies because I have so many needs all at once. As opposed to working with much more developed companies, you’re thinking like somebody who’s piloting a small boat: they are probably doing lots of different things, they are running for themselves but they’re doing all the cleaning and cooking and they doing everything to keep the boat to float -as opposed to like a big crew ship which has thousand people segmented into tiny little pieces and only small number of people actually know where the whole thing is going. And it’s great to be able to work with a companies of that level where you close to the people driving the boat.
Jeff: Well, you’re very personable guy. You know, as an example here we are at CoCo MSP following an over two hour long presentation that you created this morning covering IP basics for startups. And I think that in and of itself is very unique. When it comes down to it, I guess that I like to know more about: what’s your history in law, what’s the nature of your firm and who are some of the clients that you typically represent?
Ernest: Sure. I graduated from University of Wisconsin Madison Law School in 1995 and was actually gonna do environmental law from a public interest standpoint and I wanted to go sue polluters and go to work for this Sierra club and do that kind of stuff. I ended getting into it for a couple different reasons. I clerked for a judge down a Texas and ended up working in private law and that kind got me into private law down in Texas where I did work on public interest environmental stuff for some different groups around town. But I always had that kind of in the back of my head. I like, you know, one of my desires working on environmental stuff originally was you feel like you’re changing the world in some ways. And that’s kind of fun, you’re doing kind of public policy type of thing. And so, working with entrepreneurs and innovators my career kind of grew toward working with a lot early stage companies again, back to people and their dreams, it’s fun to connect people who are trying to… they’re changing the world in their own way. I used to have a real distinction in my mind between people who are kind of a public interest/ social work and social service organizations and people who are in the world of business. I think when you’re getting back to the roots, of both of those things they’re fundamentally people what trying to implement on their vision of the world and both, you know, trying to do something good. I don’t think there is a real difference.
Jeff: Do you see yourself as a facilitator of some sense?
Ernest: You know, I try to play that role. You know, I end up again – cause you work for startups because they have to do everything you end up having done lots of different things too. You know, end up trying to…end up doing a lot of pure non-law things, giving them just kind of common sense counseling on how their business might grow, trying to connect them with people who help them figure out bookkeeping, advertising and marketing stuff, corporate finance attorneys and things like that. And I end up doing…so I try to be…I try to connect people whatever I possibly can.
Jeff: And so Merchant and Gould is the name of the firm?
Ernest: Yep, Merchant and Gould is the name of my firm.
Jeff: Yeah, who are they and what type of clients do they typically serve?
Ernest: I`ve been with them now five and a half years and it’s an intellectual property law firm. It’s the largest intellectual property law firm in Minnesota and one the biggest in the Midwest. You know, we’ve been around in various forms for over a hundred years – it’s a long lineage. We work for some of the biggest tech companies and some of the very original clients were 3M and Donaldson and many other great companies. We do work with Microsoft and we work for tons of small companies too – people literally right out of the garage, professors at universities who are coming up with new stuff. You know we’re able to service those different groups and its fun.
Jeff: Sounds like you’re start up friendly you have a unique appreciation for the entrepreneur/ start up mind. What do you do when an entrepreneur approaches you and says “this is where we’re at, we need some counseling, we need some advice, we’re at this phase or this stage, can we work out some type of creative compensation arrangement” – is that something you would ever consider taking a closer look at given the right circumstances?
Ernest: Yeah I guess it depends on how you mean by “creative arrangement.” I think that people who I regularly work with in startups and early stages of entrepreneurs and whatnot, end up frankly giving away a lot of their time simply because they’re often working with people who represent promise and who seem to be trying to be launching something new and so you want to engage with those folks maybe even before they got an enterprise going. I got a couple creatives here in town I’m working with, I don’t mean like advertising people (well one of them kinda does promotional stuff) – but they got this thing that I’m not even sure what it is it. It’s quasi creative project yet its starting to take on business legs and I’m kinda working with them sorta pro bono right now but as I tell them “if this thing goes commercial… ” You know what I mean, I’m kinda just helping em out but if its something that’s gonna take on business legs where they end up getting financing and stuff it’d be a thing where I have expectations that they would transition into becoming a standard client relationship.
Jeff: Ok sure. If I’m an entrepreneur and I’m meeting with Ernest Grumbles and I’m also meeting with you know a couple other Attorneys in terms of pre-qualification and just developing relationships, what are good questions or are a few questions that is good for an entrepreneur to start off with to ask an attorney in initial meaning to find out if there could be a potential fit.
Ernerst: You know a couple of things I would wanna know is. You’re gonna get more value from someone whose done a lot of the things that you’re interested in doing. You know you’re gonna get better value and you’re gonna get better results. And so for example, if I was shopping for doctors and if I was shopping for heart surgeons I would want somebody who is well experienced. It sounds intuitive and it sounds obvious. Same thing if you know, I got a unique import car I’m gonna hire somebody who this is all they do and they love it. So I would want to, If i got a specialty need you know whether it be property or corporate finance or tax or a number of things. You know, I would want to get a feel for this person. The thing that the person love to do. You know I have to get a good vibe. This is what they love doing. Cause then they’re gonna bring all the best that they are in terms of their creativity and energy enthusiasm and focus on the stuff I need to get done. You know that would be one thing I wanna know. Second one obviously is: How communicative of the process are they is it the kind of thing where they just say look trust me, send me the paperwork and I’ll let you know when in awhile. I find it a common complaint among even family members I know who’ve had to deal with other lawyers like family lawyers or trusting the state lawyers or other personal attorneys. Is communication is a problem, I think it frustrates clients a lot if attorneys don’t routinely communicate with them. Especially because attorneys – know what we do is its an expense- its what we do is you know what we do can be a potential high value and we try at least we believe its always of high value for clients and that’s costly sometimes I think people expect “look if I’m gonna be paying this kind of money, I wanna hear from my lawyer.” You know if I call them up and things like that and so, I would wanna get a feel that this person would be responsive, that they’re focused and that they know what they’re doing -cause then I feel like (a) I’m gonna hear back from them I’m gonna achieve the results I want. Attorneys should be able to point to other projects they’re working on, other kinds of clients that they’ve helped. I recognize you’re not gonna give the details of what you’re doing for other clients but you should be able to say “look these are among the clients I work for,” or people like you, people who do similar things or similar goals and I know what they’re trying to do and I should be able to hear about that. And then obviously cost too. I think people focus a lot on the expense of lawyers and I think you can always measure against what you’re trying to accomplish and the value of what you’re trying to end of up. Attorneys can add a ton of value into a process in a business goal. And so you look at where, for example, somebody says look, “it’s gonna cost me $20,000 dollars ultimately to get this patent”, not the initial filing but maybe through all the process. And potentially even more than that – depending on the kind of technology. But then you look and say, look and see, that this is, you know, a start up, let’s say, some kind of bio-tech company, and this is the main first kind of patent that they’re gonna try to use to get investment and it could be tied to something that’s gonna generate millions of dollars in business. And so that you have to always look at that. But at the same time you do need to know cost, and that stuff should be communicated.
Jeff: When we first met originally, I’d reached out to you some months back based on an article that your name was attached to in the Star Tribune Blog section called Your Voices and it looks like you’re kind of a regular contributor to that blog, in the intellectual properties space. You’ve written about the Tekne Awards, you’ve written about other intellectual property aspects, patent issues, and most recently, I noticed that you had written a post that we picked up on TECHdotMN and added to our list that I felt was quite comprehensive, titled “5 Reasons We Need the Angel Investment Tax Credit In Minnesota.” Could you explain in your own words what the Angel Investment Tax Credit is, or what the Saltzman Bill is?
Ernest: The Angel Investment Tax Credit is – I’ll just simplify it – I mean it’s generally what these kinds of bills are, or statutes, is a tax credit to encourage angel investors to put money into new enterprise, and obviously there’s different ways to do that. One of them is to give people a credit for some of the money that they’re putting at risk. You know, sometimes that can be a challenge, like in a market like we’ve got right now that’s been, under anybody’s evaluation, a tough one where there’s real risk, you know, you’ve seen such collapse in value and equity and things like that, getting people to put more money at risk is a real, can be a real challenge. And yet, it has to happen because no one, I mean, there are always a certain percentage of companies that will bootstrap, right. They’re doing it completely by themselves. There’s always on the other end, there’s people who are getting massive VC infusions. And then there’s a ton of people in the middle who can’t bootstrap, or for whom bootstrapping is just not, not going to be sufficient to get them over the hump, who’ve found it difficult to get money from banks. Banks have been in lockdown mode, things like that. And, you know, VC money can be really hard to find but a lot of times, that’s not what you need. A lot of times what you need is this gap of like $50,000 up to a million bucks -which is usually below the level of a VC. And so, those people have come on to take a critical role in the launch of new enterprise. And so, this is, the intent is to put this tax credit which, I think 18 other states have, including many of the states surrounding us, including Iowa, to get angels to get their money in motion and angel investors – these people who invest 50K to 500K up to a million dollars. And get that money for the use of good new enterprise.
Jeff: On that note, obviously you are a vocal supporter of it and you’ve spread the word amongst the Star Tribune readership. But I am also familiar with another initiative that you’re a party to, called MOJO/Minnesota. What is MOJO/Minnesota?
Ernest: MOJO/Minnesota is what we refer to as a collective of entrepreneurs, VC’s, financiers, and other folks -and also some local creative folks – who work in that milieu that play roles in business development. There’s about 12 of us. I’m one of the cofounders along with Brad Lehrman and we’ve got a group of about ten other who’re helping launch the whole thing as well.
Jeff: You said that a little bit quietly, that was Brad Lehrman?
Ernest: Brad Lehrman, yup.
Jeff: Okay. He’s a cofounder of Mojo. What does he do?
Ernest: He’s a corporate finance attorney at Lommen Abdo.
Jeff: Okay, great. So you two are kind of leading the cause here and championing MOJO/Minnesota?
Ernest: Yep, and we’ve got, like I said, we’ve got, we’ve then pulled in other folks who we think are like minded; we’ve been having a lot of fun with it. We’ve got ten other folks at least that are working with us, well not really with us, we’re all working together as a big team to try to leverage each other’s relationships and help. Let me go back to this: the purpose of MJO/Minnesota is a collective to promote Minnesota as a place of business launch and innovation. A place where innovation can get financed and can result in new business. And we’re looking at issues of policy and community. Policy, for example, this Angel Investment Tax Credit is something that we’re actively working on right now. And, community is trying to find ways to connect people from, who are entrepreneurs and startup CEO’s, with financiers with innovation policy makers, with legislators and other people who have an impact on how government can support new enterprise here, especially new emerging technology enterprise.
Jeff: And so, what has MJO/Minnesota done to this point in time or where are you guys at in terms of reaching those objectives?
Ernest: We’ve largely been in stealth mode. Originally it started as a – it was more than a year ago when we started thinking through this – it was going to be an event, it was not really going to be an organization, it was going to be an event, to try to pull together people, especially start-up folks, to get them, keep them, keep their fire alive in this down economy. And then we started pulling in other folks, people like Joy Lindsay, and Rick Brimacomb, and people who are kind of like-minded folks to think about this. We started having conversations. We’ve been kind of developing what our message is… we’re working on a website right now. We are actually actively getting ready to engage on some lobbying efforts on a couple of these critical issues to start up an innovation in financing and looking to plan some community events coming up.
Jeff: So it definitely sounds like you have a vested interest in the success of innovation and the entrepreneurial start up community in Minnesota. You know, and I guess goes down to the need. In your estimation, what is the need? How serious is the need for these things such as the angel investment tax credit and for an ecosystem that supports entrepreneurism, puts them in touch with these other key ingredients to succeed.
Earnest: Well, I think these things are critical, (a) because… a couple different things. One is new enterprise and small businesses: they are a source of a lot of job growth. The last eighteen months have been extremely challenging from a job -there hasn’t been job growth, there’s been job deflation. I mean, it’s been trying to save jobs and prevent further loss, much less growth. And it’s critical to… and at the same time you have these people losing their jobs is also the time that all this investment money is frozen up. So the very thing that would be needed to infuse into the system to give people hope and opportunity to launch new enterprise, is the time you’re not going to get it. Unfortunately, those things are going in tandem. And so, it’s kind of like a boat that started to pull too far to the right… the rudder’s gotten a little bit twisted. You kind of got to jerk it back on the way and put it right back. And so these tactical interventions from a policy standpoint… both at the community ground level and the legislative level are things that will get, you know, get that pointed in the right direction. I think it’s definitely been really challenging. I know there’s a lot of people frustrated with… you know they see all the brain capital of Minnesota, and all this history of innovation, and yet they see other places like Wisconsin and Michigan and Ohio, all those places, that are much more out front in terms of getting a place, saying “Hey! Give us you’re tired, weary. Send us…” They’ve been actually beckoning Minnesota businesses to move across the border that’s actually happened a couple of times, for things like this, for the lack of the angel investor tax credit. So part of this is actually about staunching the flow of any further loss. And also being proactive. So we start to lay the groundwork for all the great innovation here. It feels like it can stay here and thrive.
Jeff: And you’re obviously doing what you can, giving your domain expertise and resources. What do you think we could do better collectively as a community to raise awareness of these issues and to advance the dialogue and policy initiatives and get caught up or at least stop some of the damage?
Ernest: Well, you know we mentioned… I think entrepreneurs at all levels need to be engaged with the legislature. They needs to hear that this is not just something that’s good for the business community. I mean how do you define the business community? When you’ve got all sorts of people who are otherwise employees. You’ve now pushed those people all into the business community. And so that business community is all sorts of regular folks now – it’s not just this notion of very large corporations coming and asking for handouts. We’re talking about a social movement, a new generation of involuntary entrepreneurs who need to have their voice heard so they understand that promoting business innovation and supporting new (not just tech), but when i say new business innovation, emerging technology- that is a social justice issue at this point. This is not just a business issue. We can’t see those two things as separate. This is a social justice issue. You know, I just heard about… I can’t remember this gentleman’s name now… Somalian gentleman… who is leading a micro-enterprise plan in Seward, trying to connect micro-entrepreneurs in the Somali community. And you know, this is fundamentally a social justice. These are people trying to make a living. This is not just them trying to make millions off somebody, this is them trying to make day to day. And so that community needs to make its voice heard to the legislature. This is a social justice, not just a big business issue. (b) The other one is to build communities so we can cross-leverage each other in the finance community and the innovation policy makers and the start up entrepreneurs are in regular dialogue to support each other and act as a lamp for each other. So that outside Minnesota, people won’t have this perception that Minnesota… when they think of places of innovation, Minnesota jumps right to the top of the list. Because unfortunately VC money a lot of times is going somewhere else. Or people have this idea that it’s places like California or Boston, or Austin -they don’t think right away the Twin Cities and yet there’s all this great stuff going on here, this great history of innovation.
Jeff: Alright, great. Anything else you’d like to add Ernest?
Ernest: Nope, that’s good. Let’s start by getting this angel investor tax credit passed and then we can talk more.
Jeff: Thanks so much for your time today.