LexisNexis® Legal Newsroom
Potential Changes to the Private Financing Landscape

A few months ago we posted an article entitled " Financing Your Startup: How to Sell Stock without Going to Jail ." Among other things, the post described a series of legal restrictions associated with raising funds legally. Although there have been many widely publicized calls to relax...

Incubators, Accelerators and More: Start-Up Working Space in New York City

I find that New York City is an extremely friendly city for start-ups. It is impressive how New York City has managed to provide start-ups with multiple solutions to its biggest problem: pricey real estate. In my view, there are essentially three options available for entrepreneurs or young companies...

New Startup Rules from US Citizenship and Immigration Services (USCIS) *UPDATED*

New rules were just announced by US Citizen and Immigration Services that are designed to make it easier for immigrants to form startup companies in the US. As covered on The White House Blog , these rules would: Clarify that immigrant entrepreneurs may obtain an employment-based second preference...

Should You Ask Potential Investors to Sign an NDA?

I am frequently asked by entrepreneurs whether I think a startup should ask potential investors to sign a non-disclosure agreement (NDA). While the answer depends largely on the situation, my view is that in most cases an NDA is unnecessary if the only information being conveyed to potential investors...

What Documents Do I Need When Forming My Startup?

One of the more confusing parts about forming a startup is sorting through the dozen or so documents that may come into play. Below are the basic organizational documents to consider when forming your startup. Which documents are applicable to your startup may differ, depend on your startup's...

Perspectives on M&A from Corp Dev Execs at Facebook, Google, Microsoft and Salesforce.com

Earlier this week, I attended the TechNW 2011 conference organized by the Washington Technology Industry Association (WTIA). The conference was very informative and full of interesting presenters and topics. The corporate development panel discussion moderated by Tom Huseby (General Partner and founder...

Some Thoughts on Friends and Family Financing for Startups

Many founders I speak with are interested in obtaining financing for their businesses first from their friends and family members, and then from professional investors. I agree, this seems to be the common path. However, many founders do not realize the importance of complying with applicable federal...

Start-up Seed Financing in 2011: Analyzing the Trends

Fenwick & West LLP, a law firm that represents emerging growth companies, has published a survey of seed financing transactions , comparing the terms of such deals in 2011 to 2010. The survey was based on 56 transactions closed in 2011 and 52 - in 2010, mostly on the West Coast. The survey...

The Venture Spotlight - Indy Driver, Team Owner and Angel Investor Sam Schmidt

This edition of The Venture Spotlight features a 30 minute interview with Sam Schmidt, a professional indy car driver who suffered a horrific crash about 10 years ago leaving him paralyzed from the neck down. Now Sam heads a racing team and also periodically makes investments in startups. Most recently...

SEC Misses Deadline to Issue Regulations Eliminating the General Solicitation Prohibition in Regulation D Private Placements

For startups looking to raise capital, Rule 506 of Regulation D is probably the most commonly used exemption from securities registration requirements. It allows a company to make offers and sales to an unlimited number of accredited investors[1] in order to raise an unlimited amount of money. One of...

SEC Continues to Miss Key Deadline in Implementing JOBS Act, Drawing Ire of Congress

The JOBS Act contained two provisions that have the potential to help startups in their capital-raising efforts: (1) reform of Regulation D, which will permit more widespread solicitation of angel investors (this is also frequently referred to as the repeal of the general solicitation prohibition) and...

The SEC (Finally) Issues a Preliminary Rule for Repeal of the Regulation D General Solicitation Requirements

Yesterday, the SEC finally released its proposed rule to amend Rule 506 of Regulation D to eliminate the general solicitation prohibition for private placement offerings . As I've discussed in a previous post, the SEC's continued delays in issuing this rule has resulted in considerable frustration...

AngelList Posts Thoughtful Comments to Proposed SEC Form D Regulations

On August 12, 2013, the crowdfunding platform AngelList submitted some really great and thoughtful comments to the SEC with respect to the SEC’s proposed Reg. D amendments related to new Form D filing requirements and enhanced penalties for failure to file (which you can read more about here )...

For Small Firms, Visas Are a Big Headache

"Most startups and small firms lack human-resources departments to handle the complex paperwork, and the funds to cover legal expenses associated with hiring someone under the program. Only about 30% of applications for H-1B visas make it past the preliminary stage of the process, the bulk of which...

The Case of SoMoLend: Crowdfunding Platforms and Other Startups Beware of Potential Securities Law Violations

SoMoLend – Social Mobile Local Lending – is a crowdfunding platform that has peer-to-peer lending technology that allows businesses to obtain loans from a network of lenders, typically located in the same geographic area (banks, credit unions, community-development financial institutions...

First Enforcement Action Taken Against Crowdfunding Site

For the first time, regulators are taking action against one of the many crowdfunding sites that have sprung up since the passage of the JOBS Act. The Ohio Division of Securities issued a notice of intent to issue a cease-and-desist order against the Cincinnati-based crowdfunding platform SoMoLend and...

Demo Days, Pitch Events and the New Reg D

by Trent Dykes , Megan Muir and Kiran Lingam I. Introduction / Background With the passage of the JOBS Act, the regulation governing most private securities offerings is undergoing a dramatic makeover. Congress tasked the Securities and Exchange Commission (SEC) with developing new rules allowing...

Venture Capital Term Sheet Negotiation — Part 10: Registration Rights

This post is the tenth in a series giving practical advice to startups with respect to understanding and negotiating a venture capital term sheet. In the prior nine posts, we provided an introduction to negotiation of the term sheet and discussed binding and non-binding provisions , discussed valuation...

JOBS Act 2.0 Bills Officially Pass House Committee

It took until just before Memorial Day, but apropos timing as the House Financial Services Committee, on May 22, officially approved 11 bills to help small businesses with capital formation and growth. Many on the Hill are fashioning this group of bills JOBS Act 2.0, as a natural follow to the Jumpstart...

What Is Micro-Venture Capital?

Over the past few years, a new funding source for seed stage startups has developed and quickly become an integral part of the startup ecosystem. This newer brand of investor is typically labeled a seed venture or micro-venture capital fund (a Micro-VC). Micro-VCs are smaller venture firms that primarily...

JOBS Act Provisions Fuel IPO Surge, Raise Concerns

All eyes may be on the record-setting IPO of Chinese Internet firm, Alibaba, but the real IPO story for 2014 may be the significant number of IPOs this year involving smaller companies. The number of companies completing IPOs this year is on pace for the highest annual level since 2007, a surge in initial...

Five Intellectual Property Considerations for Startups - Part I

A successful startup provides a solution to a market need. Typically, the solution involves a new or improved device or technique. As a startup defines and develops its solution, intellectual property (IP) becomes a core asset of the company. Indeed, after management members themselves, IP is often a...

Should Founders Subject Themselves to a Vesting Schedule?

When advising startup clients, I frequently recommend that they subject the shares issued to their founders (as well as those issued to any equity-compensated employees and contractors) to a vesting schedule. This conversation often leads the founders to look at me as if I had just asked them to grow...