Seed stage investment deals, i.e., those in a range of approximately $100,000 on the low end and around $1.3 million on the high end, are structured either as straight equity or as convertible loans. If straight equity, the company typically issues to the investor shares of preferred stock usually designated as Series Seed which includes
Protecting Management from a Liquidation Preference Overhang
“The Founder of a $50 Million Startup Just Sold His Company — And He Didn’t Make a Dime”. Such was the provocative headline of the Business Insider article last year reporting the sad tale of young entrepreneur Lane Becker and how he and his management team received none of the acquisition proceeds on
Working the Crowd: A Primer for Funding Portals
One of the key investor protections of Regulation Crowdfunding under JOBS Act Title III is the
requirement that offerings must be conducted exclusively through a single platform operated by a registered broker-dealer or a new type of SEC registrant, a funding portal. Although SEC registration for funding portals began January 29, 2016, intermediaries (funding portals
New Investor Exit Strategy Buried in Highway Bill
Buried in the recently enacted Highway Bill, officially the Fixing America’s 
Surface Transportation Act or FAST Act, is a new exemption for the resale of securities. The new resale exemption appears in the form of a new Section 4(a)(7) of the Securities Act of 1933 and essentially codifies the so-
called 4(a)(1-1/2) exemption. New
Regulation Crowdfunding Effective Date is May 16, 2016
It’s official: the new Regulation Crowdfunding rules will become effective on May 16, 2016. The SEC’s 
final rules release of October 31, 2015 provided that, with certain exceptions, the new rules will go into effect 180 days after they are published in the Federal Register. We just learned that the rules were published in
Trick or Treat? SEC Adopts Controversial Crowdfunding Rules
At an open meeting on October 30, 2015, the Securities and Exchange Commission by a three-to-one vote adopted final rules for equity crowdfunding under Section 4(a)(6) of the Securities Act of 1933, as mandated by Title III of the Jumpstart Our Business Startups Act. The final rules and forms are effective 180 days after publication
Proposed Reforms Would Allow Unregistered Finders to Receive Success Fees
In its most recent meeting on September 23, 2015, the Securities and Exchange Commission’s Advisory Committee on Small and Emerging Companies recommended specific reforms that would significantly liberalize the rules governing private offering intermediaries and make it easier for companies to use them. If adopted, these reforms could greatly enhance the capacity of startups and
New SEC Guidance on What Constitutes “General Solicitation”
August 6, 2015 was a productive day for the Staff of the Securities and Exchange Commission’s Division of Corporation Finance on the issue of the prohibition on general solicitation in the context of online private offerings under Rule 506(b). My last blog post, entitled “It’s Complicated”: Establishing “Preexisting Relationships” with Prospective Investors, analyzed the
“It’s Complicated”: Establishing “Preexisting Relationships” with Prospective Investors
In my last post, I blogged about online funding platforms. In that post, I described the typical model of indirect investing through a special purpose vehicle (“SPV”) with the platform sponsor taking a carried interest in the SPV’s profits from the portfolio company and no 
transaction fee, as a means of avoiding broker-dealer regulation.
What’s the Deal with Online Funding Platforms?
Lately I’ve been approached by current and prospective clients about online funding platforms, either by folks interested in forming and operating them or those interested in raising capital through them. There seems to be a lot of confusion surrounding how they work and what the legal issues are, so here’s my attempt to bring some