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This post discusses Section 4(a)(7) of the Securities Act of 1933 and its impact in potentially making the resale of private stock easier.

Congress recently passed a new securities law exemption (Section 4(a)(7) of the Securities Act of 1933) that eases the limitations and restrictions surrounding the resale of private stock.  Prior to the new law, there were several regulatory hurdles that made the resale of private stock in a company difficult. As we’ve highlighted in prior posts, securities regulations require any sale of stock to be registered with the SEC (a time-consuming, expensive process), unless the sale is “exempt”—which means that the sale falls within one of the exemptions provided for in the securities regulations. (Check out one of our prior posts on securities exemptions and Rule 144 for more background on the regulations specifically surrounding selling stock in private companies as they applied…

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New Law Reduces Hurdles to Resale of Private Stock

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A cap table (or capitalization table) is a spreadsheet listing all of your company’s securities (stock, options, etc.) and who owns those securities.

A cap table (or capitalization table) is a spreadsheet listing all of your company’s securities (stock, options, etc.) and who owns those securities. Cap tables provide a basic look into the “total pie” and each shareholder and option holder’s piece of that pie (basically who owns what). More detailed cap tables will include formulas that allow the company to model future transactions. 

There’s no one-size-fits-all way to structure your cap table. Some provide only a general summary of the breakdown of ownership in a company, while others include extensive details about the individual holder, the type of securities held, issue dates, ownership percentages on a fully diluted basis, and other granular details.

When’s the Right Time to Build a Cap Table?

It’s relatively…

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Cap Table Pie

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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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We continue our hedge fund series by discussing the definition of "accredited investors," and why it is important to your hedge fund.

We are continuing our series on understanding hedge funds; we will be discussing the definition of “accredited investors” and why it is important to your hedge fund.

As a brief primer, you should know that all hedge funds considering a securities offering must comply with federal and state securities laws. The Securities Act of 1933 and 1934 (“Acts”) were put in place to protect investors after the market crashed in 1929, and prior to this point in time, securities were chiefly governed by state law (which still applies in may situations). The two main objectives of the Acts were: 1) to require that investors receive significant (or “material”) information concerning securities being offered for public sale; and 2) to prohibit deceit, misrepresentations, and other fraud in…

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Accredited Investor

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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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Public Companies Chart

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Pioneer Square Labs is a "startup studio," with its sights set on helping entrepreneurs develop ideas and then validate or crush them.

Startup accelerator? Nope. Startup incubator? Nope. Venture fund? Nope. Pioneer Square Labs is a “startup studio,” with its sights set on helping entrepreneurs develop ideas and then validate or crush them.

Started by several prominent Seattle-based entrepreneurs, investors, and technologists (including co-founders Geoff Entress, Greg Gottesman, Mike Galgon, and Ben Gilbert), Pioneer Square Labs just raised $12.5 million from from 13 venture capital firms and over 50 angel investors. The prominent venture fund Foundry Group led the round, with its managing director, Brad Feld, taking a seat on PSL’s board. The headquarters for its operations are currently on the fifth floor of the Galvanize building in the Pioneer Square neighborhood of Seattle.

Pioneer Square Labs offers Seattle startups and entrepreneurs access to several invaluable resources, including proven…

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Pioneer Square Labs

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What we’ve been reading this week at InVigor:

Glowforge, a Seattle based startup, opened up sales for 3D laser printers yesterday. They hit $1 million in just 12 hours.

The GeekWire Summit is next week. The conference convenes business leaders, engineers, investors and innovators for conversations about the future of business and technology.

Pragmatic advice from the Health Innovation Summit for aspiring healthcare entrepreneurs.

Copyright law: If a monkey takes a selfie, who owns the copyright?

Sweden has is experimenting with a 6-hour workday, proving working smarter is better than working longer. Could the U.S. ever adopt this kind of system?

4 angel-certified steps to get your startup off the ground without any venture capital

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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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Offering Comparison Chart

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News Roundup

August 7th, 2015 News Roundup

Here’s what we’ve been reading this week:

15 Free Online Learning Sites Every Entrepreneur Should Visit  Some very helpful (and free) resources

Legal Advice Startup Raises $71.5M Yay Avvo!

Closing the Gender Gap in Leadership Starts with You

Identify Your Entrepreneurial Personality Type A short and insightful assessment to identify your entrepreneurial strengths and weaknesses

Google’s New Update tells you when places are busiest. Great for the busy summer weekends!

Jon Stewart’s 5 Best Interviews on Entrepreneurship Don’t leave

Flickr I Photo: Zarko

Seattle’s Microsoft Now Offers 12 Weeks of Maternal and Paternal Leave Awesome

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News Roundup

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Startup founders will often wonder how much employee equity they should give and there are a number of factors to consider to craft the appropriate plan.

Startup founders will often wonder how much employee equity they should give.  While there is no bright line rule for this situation, there are a number of factors to consider to craft the appropriate equity compensation plan for your startup.

Types of equity to grant

Equity can be broken up into common stock and preferred stock. It’s unusual for a startup to issue preferred stock to anyone but an investor in the company, so we’ll focus on common stock. Common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the…

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Employee Equity