Venture Capital, Private Equity and Other Financings

We are all familiar with the modified ratchet and full ratchet anti-dilution provisions that relate to subsequent down rounds in the financing of start-up and emerging growth companies.  A new twist on anti-dilution provisions is raising its head and, according to the Wall Street Journal, becoming more and more common.  See “Startups Boosting the

The WinTech blog previously covered a patent infringement lawsuit filed against the “Adam Carolla Show” from ACE Broadcasting Network, LLC.[1]  The plaintiff, Personal Audio, LLC, alleges that the “Adam Carolla Show” is infringing on their patent for a “[s]ystem for disseminating media content representing episodes in a serialized sequence.”[2]  The patent could also

        On October 23, 2013, the United States Securities and Exchange Commission (the “SEC”) is expected to vote on a SEC proposal that would ease investor verification requirements under the crowdfunding rule. The crowdfunding rule, authorized as part of the 2012 Jumpstart Our Business Startups Act, is intended to benefit small businesses and startups too small

Lawsuits against employees and contractors, including consultants, for unauthorized use of a company’s confidential and proprietary information are common. For instance, on July 29, Abunassar Impact Basketball LLC filed suit against a former employee and a company he founded alleging that he “gathered Abunassar’s confidential and proprietary information in order to help start a new

One of the most rewarding aspects of practicing corporate law is the opportunity to represent a business from start-up to successful liquidity event.   While a business will face challenges throughout this life-cycle, some of the most important come at the beginning when an entrepreneur is trying to get his or her company off the ground. 

The Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law to facilitate capital raising by reducing certain initial public offering (“IPO”) and reporting requirements for Emerging Growth Companies. An “Emerging Growth Company” is an issuer that had total annual gross revenues of less than $1 billion during its most recently completed fiscal

Have you thought about having advisory board members?  If so, in exchange for their expertise, you will probably be giving them some equity in your company.  An advisory board can be a huge benefit but it’s important to have a clear agreement with each of your advisory board members.  A few of the matters that

Crowdfunding” is one of the most recent concepts in obtaining funding for private companies.  Prior to the enactment of the Jumpstart Our Business Startups Act (called the JOBS Act), private companies were not allowed to solicit investments from prospective investors unless they had a “substantial preexisting relationship” with the investor or registered the offering with the SEC. The JOBS Act allows companies to sell securities to a large number of investors, whether or not the company knows the investors prior to the sale. However, until the SEC issues guidance on how the crowdfunding offerings have to be conducted, crowdfunding will not be available as a means of financing your company except in limited contexts.

What is crowdfunding? Crowdfunding is intended to allow private companies to cast a very wide net when seeking investors. It has been conducted on a limited basis for some time but it has typically been structured in a manner that allows the company raising funds to fall outside of securities regulations. Kickstarter (www.kickstarter.com) is a website sometimes used to fund creative projects such as films and video games, usually as a donation, and one filmmaker recently raised $5.7 million on Kickstarter with contributors receiving benefits ranging from updates on the movie for a $1 contribution to a speaking role in the movie for a $10,000 contribution.  It may also facilitate pre-sales of products by offering customer rewards. Crowdfunding has also been used to provide micro-loans through companies like Kiva (www.kiva.com). Typically the loans are interest free and Kiva doesn’t take a commission. Since no profit is involved, Kiva takes the position that these loans are not “securities.” Something akin to crowdfunding is also being used with solicitations for investments given to people with whom there is already a “substantial pre-existing relationship” and who meet the “accredited investor” criteria.  However, as a general rule, crowdfunding has not been available as a source of capital for start-up companies.
Continue Reading Crowdfunding – Funding for Private Companies

President Obama signed the Jumpstart Our Business Startups Act (the “JOBS Act”) into law on April 5, 2012 to facilitate capital raising by reducing regulatory burdens on smaller companies.  As mandated by the JOBS Act, the Securities and Exchange Commission (“SEC”) has proposed rules to ease the solicitation and advertising requirements of Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), applicable to certain private securities offerings.

As currently written, Rule 506 exempts certain private securities offerings from the registration requirements of the Securities Act provided that such offerings meet certain standards. These standards include, but are not limited to, the following: (i) the issuer may not use general solicitation or advertising to market the securities, such as newspaper and magazine ads, television and radio broadcasts, and seminars whose attendees were invited using such means; (ii) the issuer may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchasers; (iii) the issuer must be available to answer questions by prospective purchasers; and (iv) the purchasers of the securities receive “restricted” securities, meaning that the securities may not be sold for at least one year without being registered.
Continue Reading JOBS Act: Impact on Regulation D Offerings