Some entrepreneurs learn the ropes of startup life at a lab or incubator, others at the school of hard knocks. Jeff Kurtzman was the latter.
“My two college roommates and I fell into a business. We launched and started seeing success on day one,” said Kurtzman, previous cofounder of his college business, Better World Books, and current cofounder of Bark Social. “We were sailing so fast that we didn’t have to raise money for five years. We were 23 years old and had no idea what we were doing.”
Five years later, the startup, Better World Books — an online retailer for used books — had grown exponentially, with over 400 employees and $70 million in annual revenue. Now a large, thriving company, Kurtzman and his partners decided to raise $5 million in venture capital funding. And that’s where things went south.
“That ended up screwing us,” he said.
Despite how successful their company had become, the partners made a deal that was too investor friendly and unknowingly gave away too much of their control as founders.
When Kurtzman and his partners were forced to buy out their initial investors, they didn’t have the $15 million they then needed. They turned to a mezzanine debt firm to pay off investors, but when they went into technical default on the loan, the firm forced them to sell their company.
“We needed to defend ourselves,” Kurtzman said.
The trio called on George Nemphos, lawyer and founding member of Baltimore-based Nemphos Braue Law. An entrepreneur himself, Nemphos had both the startup and legal experience to go to battle for Kurtzman’s team, helping them win back some of their money.
“I’d heard how good George was in these matters — a good negotiator, founder friendly,” said Kurtzman. “He jumped right in, found a few pressure points to push on and we ended up getting something. Which was way more than we expected.”
Throughout his career, Nemphos has developed his expertise around the legal complexities specific to entrepreneurship.
“Jeff had obtained a Ph.D. in how not to do it,” said Nemphos. “They did amazing in building the business. They made what was in the end a tough deal tougher than they should have. Now we work with him in a manner where the legal and structural pieces provoke the business’ growth, not hinder it. Creativity is important here.”
Today Nemphos continues to provide legal counsel for Kurtzman, this time as he and his partner build Bark Social, an off-leash dog park with a beer garden and coffee house in the Baltimore and D.C. areas, set to open in 2020.
“We’re in the heat of it right now,” said Kurtzman. “We’re working with George to make sure everything is set up properly from the get go: how much equity we give advisors, how we are going to structure the first round of capital and the ones that follow, how to retain equity and not lose control.”
In Kurtzman’s view, Baltimore lacks the capital and legal support necessary to help its founders thrive. It has been Nemphos’ personal touch and entrepreneurial know how that helped him and his team get back on their feet.
“I like that Nemphos Braue is a boutique firm,” said Kurtzman. “I’ve dealt with other firms where everything is tossed off to the junior person. Here, George is the one that’s calling me back at 7 p.m.”