LexisNexis® Legal Newsroom
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...

New Regulation A: Will It Get an A+ From the Startup Community?

On March 25, 2015, the Securities and Exchange Commission (the “SEC”) announced that it was adopting final rules amending and updating Regulation A. These new rules, which become effective on June 19, 2015 , have been informally dubbed “ Regulation A+ .” (Please note that all...

Why You Can’t Really Include Non-Accredited Investors in Rule 506 Offerings

One common misconception I encounter among startups is the idea that companies raising capital can include non-accredited investors in Rule 506[1] offerings. While it is technically true that a Rule 506 offering may include up to 35 non-accredited investors, what is often missed is that it is not really...

FTC Urges Start-Ups to Incorporate Cybersecurity Early

by Mary C. Zinsner and Ethan G. Ostroff The Federal Trade Commission is proactively encouraging start-ups to take cybersecurity seriously and include consumer data safeguards early in the innovation process. At the FTC’s Start with Security conference in San Francisco on September 9, FTC Chairwoman...

Yes Virginia, You Can Build Market Support on OTC Markets

We all know about the famous letter from one Virginia O’Hanlon in 1897 to the New York Sun newspaper asking if there really is a Santa Claus. Her father encouraged her and told her, if it’s in the Sun it must be so. The paper wrote an editorial entitled, “Yes, Virginia, there is a Santa...

Immigrants Play Key Role in Billion Dollar Startups - NFAP

NFAP, March 2016 - "Immigrants play a key role in creating new, fast-growing companies, as evidenced by the prevalence of foreign-born founders and key personnel in the nation’s leading privately-held companies. Immigrants have started more than half (44 of 87) of America’s startup companies...