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A Checklist for Your New Joint Venture

The following post consists of a comprehensive “Equity Joint Venture” Checklist prepared by Gene Barton, a Principal in the Boston office of Fish & Richardson P.C. The purpose of this checklist is to ensure that you cover all of your bases when considering a Joint Venture to ensure there are no surprises. It originally appeared in VC Experts ‘Intellectual Property and Joint Ventures’ Reference book.
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Fintech Conference Insights from an Angel Investor

Editors Note: Gerard is a well regarded Angel Investor and thought leader in early-stage investing in Toronto, Canada. As a result this piece not only has interesting commentary on potential trends in 2015 from the conference he attended, but it also has interesting comparisons of the U.S. vs Canadian startup scene.

Having returned from The Future of Money and Technology, a FinTech conference in San Francisco, I had some thoughts on trends as we embark on 2015 for financing and growth of start-ups. There were clearly several trends in addition to Bitcoin and other cyber currencies that emerged in the various panels. In summary those trends are dominated by a focus on big data, regulatory changes in capital formation, an increase in investment by strategic investors or mainstream companies like Citi Ventures and the evolving collaborative consumption economy and the start-ups it is spawning like Instacart of which there are 387 listed for investment on Angel List.
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Raising Capital for your Startup – Legal Considerations for both Founders & Investors

In this second segment of a two-part series (see Part I – “Answering Common Legal Questions When Starting Your Startup), ACE Portal’s General Counsel, Jason Behrens, and Evan Bienstock, a partner with Mintz Levin, discuss several key terms and considerations that are applicable to start-up capital raises.

For anyone who has just formed a new company, is beginning to consider capital raising for their company or is interested in start-up financing generally, this interview is particularly informative.

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What to Look for in a Term Sheet – An Attorney’s Perspective

VC Experts has teamed up with Aspatore Books to reprint some of the more salient sections of Alex Wilmerding’s Deal Terms, The Finer Points of Venture Capital Deal Structures, Valuations, Term Sheets, Stock Options and Getting Deals Done. This excerpt features an interview with a leading legal expert in the private equity arena, James M. Crane, who has served as counsel at the Boston law firm of Testa, Hurwitz & Thibeault, LLP.

Jim’s perspective is representative of the candid, forthright demeanor that entrepreneurs and venture professionals look for in counsel. And it’s a fascinating look at what a seasoned lawyer thinks you should look out for term sheet. Read More

Employee Incentive Plan Alternatives After a Down Round

Employee Incentive Plans for Privately-Held Companies

Despite the recent improvement in capital markets activity, many small, privately-held technology companies continue to face reduced valuations and highly dilutive financings, frequently referred to as “down rounds.” These financings can create difficulties for retention of management and other key employees who were attracted to the company in large part for the potential upside of the option or stock ownership program.

When down rounds are implemented, the investors can acquire a significant percentage of the company at valuations that are lower than the valuations used for prior financing rounds. Lower valuations mean lower preferred stock values for the preferred stock issued in the down round, and as preferred stock values drop significantly, common stock values also drop, including the value of common stock options held by employees.

Consequently, reduced valuations and “down round” financings frequently cause two results: (i) substantial dilution of the common stock ownership of the company and (ii) the devaluation of the common stock, particularly in view of the increased aggregate liquidation preference of the preferred stock that comes before the common stock. The result is a company with an increasingly larger percentage being held by the holders of the preferred stock and with common stock that can be relatively worthless and unlikely to see any proceeds in the event of an acquisition in the foreseeable future.

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Evaluating a Multi-Family Office

Multi-Family Offices are more and more common. Are they right for you?

The family office, a product of the early twentieth century, is rapidly evolving in response to a number of factors: the turmoil from the recent consolidation and personnel changes in financial services firms, a heightened sense of the need for improved risk management and objectiv­ity and the high cost of attracting and retaining the professional talent needed today to advise and serve family members on a wide range of issues.

Just a couple of decades ago a fortune of $50 million was more than sufficient to justify directly employing a staff of accountants and in­vestment managers to keep track of the family finances, including the holdings of various trusts and foundations. Today, the “break even” point is closer to $250 million and climbing. Hence, many former single-family offices have grown into multi-family offices (“MFOs”), offering unrelated families the ability to share a CFO, CIO, tax professionals, and experienced administrative staff as well as valuable intellectual and technology resources.

In many ways it has parallels to the emergence of fractional jet ownership as high net worth individuals ask, “Given my needs, would I rather own all of a single engine plane or a share of a private jet? And, would I like to pay someone else to worry about hiring the peo­ple to fly it and care for it, handle security, do the safety checks, update the insurance and all the other hassles of maintaining a group of personal employees?” Similarly, contracting for a “share” of the staff at an established MFO often can securely provide access to talent, processes, intellectual capital and sys­tems that simply cannot be justified at lower asset levels.
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