Practical advice. Flat rates. Plain language.


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Is raising money from non accredited investors worth the costs and risks? We take a look at the options for the friends and family financing round.

Is the family and friends round worth the costs and risks? After discussing the pros and cons with us, entrepreneurs often decide against raising money from family and friends. In today’s post we’ll talk about six different ways you could raise money from family and friends. …

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Friends and family round

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See what your cap table might look like if you do capped convertible notes, uncapped convertible notes, or a priced equity deal.

In this post we have an embedded excel sheet that founders can use to compare what their cap table might look like down the road if they use a capped convertible note, uncapped convertible note, or a priced equity deal in their seed round….

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This post discusses five key securities-related issues for merger and acquisition transactions.

In business acquisitions, and especially in business acquisitions structured as stock purchases, there are a number of securities issues you’ll want to be on the lookout for. For the purposes of this post, you can think of a security as the stock or other equity interest in a company like an option or warrant. (You can check out this post for a more detailed discussion of what a security is.) Below I’ve listed 5 key securities-related due diligence issues for you to consider when purchasing a business.

We’ll start with the two key issues that are important for acquisitions of both stock and assets; we’ll finish with three key issues that primarily affect stock acquisitions:

Issues for acquisitions of either stock or assets

Two issues are of…

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M&A Securities Issues

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In this blog post we take a look at pending legislation that would create a new statutory securities exemption for the resale of private stock.

The US House of Representatives approved a bill, which if passed by the Senate and signed into law by the President, could make it easier for people to resell private stock. If you’re lucky enough to be an investor in Airbnb, Uber, or some other startup that took off but hasn’t yet gone through an IPO, how do you turn your private stock into cash? It can be tougher than you might think. As a general rule, every offer and sale of a security must be registered or exempt from state and federal securities registration requirements. This includes the resale of private securities, meaning if you have shares of Airbnb or Uber, you have to make sure you’re not violating state or…

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Regulation A+ is a new way for companies to raise money from investors. In this post we discuss Reg A+ and compare it to other options for raising capital.

Regulation A+ is a new way for companies to raise money from investors. In this post we discuss Reg A+ and compare it to other options for raising capital….

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In this blog post we look at when loans may be subject to securities regulations and why business owners should care.

Background

What is a security?
Securities are contracts for an interest in a company, sometimes called an “investment contract.” A typical example of a security transaction is the sale of company stock in exchange for cash. The SEC’s definition of “security” includes a 30-item list that stocks, notes, bonds, and investment contracts, among others. We recently discussed the Howey case, which provides the test courts use when determining whether something is an investment contract. Today’s post looks into the circumstances under which a note or loan would fall within the SEC’s definition of a security.

To start: Why does it matter if something’s a security?
Securities are extensively regulated because of the real risk that individuals and the companies they control could swindle unwitting…

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SEC Logo

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In this news roundup we discuss the FCC's "broadband" definition update (more interesting than it sounds), startup fundraising, securities laws, and more...

FCC Updates Broadband Definition

The FCC voted to raise the minimum thresholds needed to meet the definition of broadband. Internet service providers now must provide download speeds of at least 25Mbs and upload speeds of at least 3Mbps to call their services “broadband.” The previous standard was 4Mbps for download speed and 1Mbps for upload speed.

While this sounds pretty innocuous, the new definition may have some interesting consequences.

A little background: In 1996 Congress mandated that the FCC report on whether broadband is being deployed to all Americans in a reasonable and timely fashion, and Congress defined broadband as high-quality capability that allows users to originate and receive high-quality voice, data, graphics, and video.

The first and most obvious consequence of the…

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In this news roundup we look at startups' fundraising, mergers and acquisitions, a commercial lease horror story, ride sharing regulations, and more

Here’s a collection of the most interesting legal and business news we found this week:

Ride Sharing

One of the big issues facing Uber has to do with the fact that auto insurance policies for individual drivers generally don’t cover damages from commercial activity, including ride-sharing through applications like Uber and Lyft. In Colorado, USAA and Farmers are now offering ridesharing insurance. Colorado is a natural testing ground for these new types of policies, as Colorado became one of the first states to explicitly authorize ridesharing services in 2014.

Startups & Funding

The big news of the day is Box’s IPO. After a shaky ride through the IPO process, Box’s IPO appears to be an initial success. It is a home run for its…

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In this blog post we discuss what you need to know about reselling stock of private companies under Rule 144.

If you purchased stock from a startup in a “friends and family” round, can you sell it to someone else without violating securities laws? The answer to that question probably depends on whether you’re in compliance with Rule 144, which provides requirements that if satisfied, allow people to re-sell privately issued stock.

Background

There’s a general rule in the Securities Act of 1933 that if you sell a non-exempt security to another person, the sale must be registered unless an exemption from registration applies.

There’s a few things to unpack here. First, what is a non-exempt security? Second, what does it mean for the sale to be registered? Third what are the exemptions from registering the sale?

Exempt Securities
Section 3 of the Securities Act…

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