Venture Capital & Emerging Companies

This issue of TechConnect covers liability considerations for directors of Delaware public benefit corporations and profiles FinTech company Templum.

Founders choosing a structure for their business are often drawn to the limited liability company, or LLC, for its overall flexibility in both taxation and governance matters. And founders seeking access to early capital, not to mention seed investors themselves, are often drawn to the convertible note as a simple, less expensive means to raise funds. But LLCs and convertible debt don’t always mix.

This article explains why the “cryptocurrency” label can be misleading, and suggests we use “virtual currencies,” “security tokens,” and “utility tokens” instead.

There has been a marked increase in the amount of money being invested by Chinese investors into U.S. early stage biotechnology companies since 2017, spurred on by direct encouragement from Beijing through its Made in China 2025 industrial policy, which specifically targets biotech as a strategic industry eligible for greater government backing.

Sam Effron, a Member in the Mintz Venture Capital & Emerging Companies Practice and co-editor of MintzEdge, sits down with Sean Grygiel, a Member in the Mintz Intellectual Property Practice, to discuss key IP considerations and strategies for new companies.

John Rotchford, founder of SASI, a boutique investment banking firm, discusses how to prepare your company for sale, how buyers will value your business, and how to achieve a favorable and timely outcome.

Inspired by his own experience forgetting the correct notebook for an important meeting, Rocketbook co-founder Joe Lemay set out to find a modern solution for note taking in 2014. After testing out electronic pens and smart tablets, which were ultimately disappointing, Lemay teamed up with Jake Epstein to develop a new product, a reusable cloud-connected paper notebook called Rocketbook.

While many of the issues involved in various transactions are similar, every single transaction that we get involved in is nuanced and different in some way from other similar transactions. Pattern matching is important, but each successful enterprise is successful in a unique way. Building an enterprise requires a balancing of the economic interests of the various parties. The founders may want to control their destiny or be captains of industry, in addition to making outsized returns. Investors will be laser focused on those returns but may also be interested in promoting activities that involve sustainability or technical breakthroughs. Employees will be hoping for financial rewards but may also want to be involved in cutting-edge technologies and a flexible workplace. Finally, the board of directors needs to monitor the enterprise and provide relevant advisory insights. Getting this right is so much more than processing a form; it requires deep domain knowledge of the industry sector and a good sense of the people involved. It is similar to why the best doctors examine a patient before prescribing medication. Knowing the context of the situation truly matters and one size never fits all.

Platforms such as Instagram, Snapchat, and Twitter have created celebrities with huge loyal followings – in some cases, millions or even tens of millions of followers – who have never appeared in a Hollywood movie or TV show. These influencers instead generate content – videos, photos, tweets, and the like – on the social media networks, and that content is shaping popular culture among younger consumers and attracting significant advertising dollars.

Mintz attorneys are often asked as to why we don’t simply provide “forms” on our website that can be downloaded and used. Our simple answer is: THE FORM IS ALWAYS WRONG!

Jeremy Glaser discusses the simple approach entrepreneurs should take when making their initial pitch to investors in order to pique their interest.

In this issue we focus on a number of basics for building growth enterprises. We lead off with a terrific podcast on the importance of assembling a strong board of directors. We follow with an article on a new securities law that permits the aggregation of up to 250 investors in a single investment vehicle so long as the entity has no more than $10 million in capital contributions. This new law will be particularly useful to online platforms that aggregate angel and seed investors to invest in start-ups. We then discuss the importance of stock options and creating a culture of ownership, another basic in creating a valuable company. We conclude this issue with two innovator profiles: [email protected], a new shared wet lab space located in New York’s SoHo neighborhood, and RainFocus, which provides a software platform for delivering insights and marketing messages at large-scale conferences and events.

Ben Stone – an attorney at Mintz Levin and a former founder, CEO and General Counsel – talks with Ananth Kasturiraman and Caroline Fay, the co-founders of Skillist, an innovative job application platform connecting untapped talent to in-demand jobs, about their efforts building a mission-driven business and “reinventing the resume.”

One of the critical keys to a successful venture is aligning the interests of the employees and management with the interests of the shareholders/investors. After all, perhaps the greatest asset of a company is its people. Without a competent and motivated workforce, a venture is unlikely to succeed no matter how great an idea or business concept is involved.

Small venture capital funds and special purpose vehicles, which otherwise qualify as “venture capital funds,” can now raise money from up to 250 beneficial owners and remain within the 3(c)(1) exemption of the Investment Company Act of 1940 (the “Investment Company Act”).

In this podcast, Dick Pfister, the founder of investment management firm AlphaCore Capital and one of the partners of Altegris Investments, explains how he built successful investment management businesses.

In this podcast, Georges Daou, founder of a number of successful technology companies and of the Daou Winery, explains why entrepreneurs need to develop and convey to investors the passion they have for their businesses in order to succeed.

In this podcast, Jeff Belk, an early employee of Qualcomm and serial entrepreneur and investor, explains why it is important to build a great board of directors and how to communicate to your board most effectively.

Jeremy Glaser, Co- chair of the Mintz Levin Venture Capital & Emerging Companies Practice, talks to Blaise Barrelet, a successful serial entrepreneur and founder of Analytics Ventures, about how and when companies should raise money.

Jeremy Glaser, co-chair of Mintz Levin’s Venture Capital & Emerging Companies Practice, discusses the role of the CFO in growing companies with Jeff Gilford, co-founder and principal of BlackFord Partners, Inc.