Start Ups, Artificial Intelligence, and the Law
The Start Up sector is generally thought to be the most dynamic and innovative segment of the economy and one that is crucial to growth and development. This is just as true in the Artificial Intelligence (AI) sector. This seminar provides a deeper understanding of the legal and business considerations, both theoretical and practical, within the Start Up sector for those wishing to work in a Start Up and for those wishing to advise them with a focus on Starts Ups and AI. We begin with an overview of the role of the Start Up sector in the US economy, its history and key moments, and how it compares to the Start Up sectors elsewhere. We then explore the critical legal, financial, and business considerations that populate the Start Up space, especially in the AI sector. These include contractual issues, entity formation, the structure of Venture Capital (VC) Funds and other early-stage investors, tax considerations, and other regulatory issues (e.g., Dodd-Frank, Investment Company Act) that have a substantial impact on the sector. This will include readings focused on actual Start Ups and their structure. Our discussion then moves to examining sources of capital, the “pitch” deck and “pitch” meeting and how the VC firms actually operate and make decisions. We then address issues critical to the business value of the firm — financing, launch plans, intellectual property rights valuations, and stock and option compensation to name a few. We then dive into the “exit” question — what considerations are relevant to the timing and structure of an exit. For example, when are strategic acquisitions preferred and when are Initial Public Offerings (IPOs) and what roles do the law, strategic considerations and global capital flows play in this? Finally, we spend some time examining the growth of certain Start Ups in the AI space as well as others. Throughout the class the readings will involve a mix of academic and practice-oriented pieces and we will highlight differences in Start Up sectors around the world. Some sessions will involve guest lecturers.
Assessment for the seminar will depend on completing a project involving bringing together an idea for a Start Up, along with legal documentation and negotiation, and “pitching” it to a panel of experts (ala the television show “Shark Tank”) and on class participation.