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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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Today’s blog post will discuss different kinds of startup investor and explore other ways startups find the financial support they need to be successful.

While not all startups have to raise money to scale, most startups will need some investor money to grow. When it’s time to fundraise, there are many potential sources of funding for your startup. Today’s blog post will discuss different kinds of startup investor and explore other ways startups find the financial support they need to be successful.

What is an Angel Investor?

Angel investors are usually individuals, or groups of individuals, who invest their own money into early stage companies. “Seed funding” from angel investors is usually one of the first sources of financing a startup company will pursue (generally after raising initial funds from the founders and their friends and family). This seed funding is generally used to support the…

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Seed funding

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In this post we discuss a bill in Congress (HALOS Act) that would make it easier for startups to raise funds at pitch events.

Presentations made at startup demo days on college campuses and at accelerator pitch events routinely mention the details of a company’s effort to raise capital through the private sale of securities. This practice, however, raises concerns over whether these presentations amount to a ‘general solicitation’ for a company’s securities under Regulation D of the Securities Act. The definition of a general solicitation could include any advertisement, article, or other communication, including any meeting where the attendees were invited by a general advertisement that present the opportunity to participate in a company’s securities offering. If an early stage company makes a general solicitation, then it may be precluded from using certain valuable exemptions from registering their security offering with the SEC.

Companies…

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Space Needle Halo

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Today's post discusses the concept of securities offering "integration" or "integrated transactions" in securities law and startup law.

When companies raise money from investors, the transaction will be governed by securities laws. These securities laws have complex requirements that often “trip up” companies unfamiliar with the rules and their application. In today’s post, we tackle one of those areas of securities and startup law where companies often trip up: integration.

What is “Integration” in the context of a securities offering?

To better understand integration, you’ll need to first understand what a “securities offering” is. In very simple terms, a securities offering is a transaction where a company is offering to sell a security in exchange for (in most cases) cash. You can check out a discussion of the more precise definition of a security in our prior post.

Integration is a term in…

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Securities regulations

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Today, we are continuing our series on Employee Equity Explained by discussing stock options.

Today, we are continuing our series on Employee Equity Explained by discussing stock options specifically.

Stock options are contracts that allow an employee to buy shares (this is called “exercising” the option) at a fixed price. Options are different than receiving stock because an option is exactly as it sounds; it’s an option to buy stock upon certain conditions being met, such as vesting (discussed below).

There are two standard types of stock options: Incentive Stock Options (“ISOs”) and Nonstatutory Stock Options (“NSOs”).

ISOs provide the recipient with certain tax benefits but they can only be provided to employees of the company, not independent contractors or non-employee board members. Additionally, only $100,000 in ISOs can be exercisable in any given year. NSOs on…

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Stock Options

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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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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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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