Bruce V. Bigelow, of xconomy.com-San Diego, writes about a CEO panel discussion held at Biocom (a CA life sciences trade association) regarding the advantages and disadvantages of start-ups using a “virtual company” business model (See Biotech CEOs Discuss the Virtues of Going Virtual, March 26, 2009).
The basic business model for a virtual company is to (i) have the intellectual property and other assets owned by the company, (ii) employ a “core” senior management group who oftentimes will work remotely from home office, and (iii) outsource most functional activities. As such, the virtual company most often will not have any headquarters or main office, while employing a limited number of individuals. This, of course, limits overhead/expenses of the company, which is particularly important in the start-up world.
The virtual company model is one that may increasingly become attractive to start-up tech companies. This is especially true in tough economic conditions during which such companies need to limit their cash-burn as their access to capital lessens.
Vermont seems to be ahead of the curve on this one. In June 2008, it passed new laws making it easier to establish and maintain virtual companies in Vermont (See An Act Relating to Miscellaneous Tax Amendments). The law attempts to make is easier for virtual companies, who transact most if not all of their business through the electronic world, to comply with the various business entity laws of the state (e.g. board meetings can be conducted through “electronic means”, such as web/tele conferences; all filings can be done electronically). I don’t think that this law will make Vermont the “Delaware of the Net” as some hope, but it does exhibit some recognition of the potential growth of the virtual company business model.
- Gregg J. Lallier
