Last month I wrote about the four stages of startup capital – (1) the seed round, (2) the angel round, (3) the venture round, and (4) the bridge/pre-ipo stage round. This month we’ll take a look at what startups need to do to prepare themselves for a seed or angel round. [Read more…]
This post first appeared in Startup Southerner on February 1, 2016.
When it comes to incorporating a startup, founders often file articles of incorporation (a.k.a. a charter or a certificate of incorporation) with their state’s secretary of state and stop there. They think that the filing is enough to form the corporation. However, forming a corporation involves a number of additional steps, and a corporation is not validly formed unless many of these steps are performed. So, here are the most important ones. [Read more…]
In October, the SEC finally completed its implementing regulations to Title III of the JOBS Act, more commonly known as the “crowdfunding” exemption. The 600-page release can be found here. I’m not going to bother summarizing these regulations, as so many others have done a very good job doing of that already. So, as I previously did with the proposed regulations, I’ll instead offer some of my thoughts on and reactions to the final rules: [Read more…]
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 a second head. It’s not hard to see why they would be somewhat confused as to why I recommend this course of action. As a technical matter, usually (but not always) my client is the startup itself and not the founders personally. And while I am always very clear about this with my clients, as I must be as an attorney, my clients’ founders often see me as their adviser, at least on some instinctual level. In addition, at the early stages of a startup, before any significant investors are involved, the founders have complete control over the company. So they often ask why would they do something like subjecting their own shares to a vesting schedule that appears to be contrary to their own interests and why I would recommend that they take such an action. After all, they can only lose by subjecting their shares to a vesting schedule, right? [Read more…]