Corporate Finance & Securities

New Law to Ease Restrictions on 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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Corporate Finance & Securities

General Solicitation and Why 506(c) Matters to Your Startup

There has been a lot of buzz within the investment community about equity crowdfunding for both accredited investors under 506(c) and for non-accredited investors under Title III of the JOBs Act and recently enacted state law exemptions, including the crowdfunding bill recently passed (but not yet enacted) in Washington.

The main feature of both types of crowdfunding is the company’s ability to spread the news about the investment through the community, by advertisement and public broadcast.

Historically, or rather from the early 1930s until last year, you could not spread the news about such a “private placement” generally, as doing so by default made the offering “public,” triggering onerous securities regulations that can be incredibly expensive to comply with. Instead, investors learned...

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Corporate Finance & Securities

Congressional Committee Contemplating JOBS Act 2.0 to Make Crowdfunding More Workable

The United States House Financial Services Committee held hearings last week on bills that would rewrite legislation from the 2012 JOBS Act. At this preliminary stage the bills, which relate to crowdfunding, Reg A, and other securities laws, are only “discussion drafts of legislation.” For these bills to actually be finalized, they would have to get out of the committee, be passed by the House of Representatives, be passed by the Senate, and be signed into law by the President. Here’s a quick update on what those bills would do if enacted into law:

The Equity Crowdfunding Improvement Act of 2014

Rep. Patrick McHenry (R., N.C.) put together the draft of this bill, which would totally overhaul the crowdfunding portion of the...

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Business Startup

iVLG News Roundup Week 14 2014: IPO Market Heats Up in Early 2014; Imgur Raises Capital from Andreessen and Reddit; Crowdfunding and the Rule Making Debate

IPO Market Heats Up

The market for initial public offerings seems to be heating up announced the NY Times this week after Grubhub began selling stock publicly. Grubhub’s IPO price raised 40% in the first day of trading but has since waned.  The Grubhub deal, which followed the earlier merger of Grubhub and its one time rival Seamless, was among other notable IPOs this year. Overall, the first quarter of 2014 has been very strong for IPOs and has some talking of a repeat of the dot com bubble era.

Imgur Doesn’t Need Money But Takes $40 million Anyway

Image sharing site Imgur received $40 million in funding from VC firm Andreessen Horowitz despite only 2 months ago saying they didn’t need the...

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Business Startup

iVLG News Roundup Week 5 2014: Washington State Advances Crowdfunding; Microsoft CEO Search Nearing End; Bay Area’s Tough Week

States, Including Washington, Take the Lead on Equity Crowdfunding through Intrastate Offerings

It has been widely reported that states are taking the lead on advancing legislation that gives startups access to capital through equity crowd funding. And this week Washington state joined the leaders as the crowdfunding exemption bill HB 2023 advanced through the Washington state house of representatives. The bill is designed to provide an intrastate exemption to Washington’s rules for certain smaller deals, which would allow some of the promise of Title III of the Jobs Act to be realized for intrastate offerings. The bill must still move through the senate, and if it does, Washington would join Wisconsin, Georgia, and Kansas in passing crowdfunding legislation.

Microsoft to Name New CEO

Microsoft announced that it will meet this weekend to decide...

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Corporate Finance & Securities

Our Thoughts on the Proposed Crowdfunding Rules

Last week the SEC released proposed rules for non-accredited investor crowdfunding, which would let unaccredited investors (anyone) participate in securities offerings. What this means in plain English: when and if these proposed rules are enacted, companies will be able to raise up to one million dollars by selling stock to anyone willing to buy it, and for the first time they won’t have to do an IPO to be able to reach these investors.

Background Currently, to sell stock, companies have to:

File a registration statement and go through an IPO process that is generally prohibitively costly for all but the most successful companies; or Conduct a private placement offering that only accredited investors (individuals with $200k in annual income or over $1mm in...

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Corporate Finance & Securities

Investor Verification Services Offer Simple Affordable Solution for Companies Using Advertising to Raise Funds

A recent Wall Street Journal article discussed the “murky” waters that have become the regulations surrounding the JOBS Act and the lifting of the ban on general solicitation for raising funds in a private placement. The article highlights some of the issues with the new regulations and points out that many small, privately-held companies are not taking advantage of the opportunity to raise capital using general solicitation because of the uncertainties associated with the new rules. One “hurdle” that the article points to is the requirement for companies to take “reasonable steps to verify” that investors are accredited investors—individuals with annual income of at least $200,000 (or $300,000 joint income with his or her spouse), or at least $1M in...

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Corporate Finance & Securities

Early Numbers Show that Companies are Using Rule 506(c) to Raise Funds

If you are as curious as we are about the consequences of the new Rule 506(c), I’ve got some good news for you. There’s some early data that points to how issuers are taking advantage of the recent SEC rule changes.

Keith Higgins, the newly appointed director of the SEC’s Division of Corporate Finance, recently commented on the preliminary effects Rule 506(c) on the investment landscape. For those of you that have been following the JOBS Act and its various moving parts, you are well aware of Rule 506(c) and the fact that the SEC lifted the ban on general solicitation for securities offerings. For the rest of you, here’s a primer on Rule 506(c) and the lifting of the ban...

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Corporate Finance & Securities

Proposed Rules for Title III of the JOBS Act (Crowdfunding) Released

Last Wednesday, the SEC released its proposed rules for Title III of the JOBS Act—the rules that will govern crowdfunding. The proposed rules are long (585 pages), complicated, and full of obstacles to trip up companies trying to utilize this form of raising capital. 

In an attempt to try and digest the nearly 600 pages, AngelList’s COO Kevin Laws has started a working summary of the Title III proposed crowdfunding rules. Of course, these rules are simply proposed at this point so you should keep in mind that these are not final and may be changed before they are implemented. Laws’ summary is provided as a Google doc that he is updating as he receives feedback.

If you’re a crowdfunding advocate or...

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Corporate Finance & Securities

A New Way to Solicit Investment in Private Funds, 506(c) “Crowdfunding”

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As of September 23, managers of hedge funds and other types of private funds can publicly solicit investment for their funds. As part of the JOBS Act, there’s a new way to conduct “private placements”.

Private placements are the offering of securities without the filing of a registration statement. Filing a registration statement, sometimes called “going public”, is an (often prohibitively) expensive process and requires annual and quarterly public disclosures, including information many funds would consider to be trade secrets.

Before the provisions of the JOBS Act were enacted, private funds could only offer interests in the fund to individuals with which the fund operators had an existing relationship. Now, if funds comply with all...

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