In the world of early stage investing, there exists a range of structures from the most founder friendly to the most investor friendly.
The most investor-friendly structure involves some type of a priced round in which the investor receives shares of a class of preferred stock with a negotiated set of enhanced economic, management and
I had a chance to sift through Pitchbook’s U.S. VC Valuations Report for the first quarter of 2024. The data point that really jumped out at me was the increase in down rounds. The number of flat and down rounds as a proportion of all VC deals has been rising consistently since the first
Last month, the Federal Trade Commission voted 3-2 along party lines to impose a general ban on non-competes, claiming these arrangements stifle innovation, limit employee mobility and suppress wages. I blogged about the issue when the FTC proposed the ban last year. So far, there have been three separate lawsuits seeking to block the
There are generally two ways you can control a corporation. One is by owning a majority of the stock, in which case you control the board of directors. The other is to secure control contractually, through agreements and charter provisions that provide protections such as board representation or vetos over major transactions. But what happens
Identifying potential investors is one of the most difficult challenges facing early-stage companies. The range of amounts sought at this stage is typically greater than what could be provided by the founders and friends and family, but below what would attract a VC or a registered broker-dealer. The problem is even more acute in geographic
Process still matters. That’s the main takeaway from the Delaware Court of Chancery’s 200-page opinion striking down Tesla’s 2018 incentive package awarded to Elon Musk. The court rescinded the incentive package mainly because Musk was found to control Tesla and the process, the directors authorizing the package were not independent and the stockholder vote approving
The Securities and Exchange Commission recently brought its first two enforcement actions against issuers of non-fungible tokens (NFTs), resulting in cease-and-desist orders, penalties and other remedies, finding that the NFTs were investment contracts and that each of the issuers had engaged in an offering of securities without registration in violation of Section 5 of the
Judge Analisa Torres’ greatly anticipated Order in the SEC’s lawsuit against Ripple is a split decision. The Order basically finds that Ripple’s digital token XRP is a security when sold privately to individuals and institutional investors pursuant to purchase agreements, but is not a security when sold on a digital asset exchange where sellers don’t
The anti-child trafficking thriller “Sound of Freedom” just opened in theatres on July 4th. Based on a true story, it stars Jim Caviezal as former Homeland Security special agent Tim Ballard who quits his job with the agency and embarks on a mission to rescue children from traffickers in Latin America. Another true story relating
In the world of venture capital, there are certain investor rights that ensure the smooth execution of exit transactions. The primary such mechanism is the drag-along provision, under which one group of stockholders agrees in advance to sell or vote their shares in a sale of the company approved by another group of stockholders and/or
