There are two reasons why I now think the recession is over. First, within the past two weeks several clients have seen a dramatic increase in investor / acquisition interest:
- A client that has been offering secure-communication software for six years found fundraising very difficult one year ago. Now it is being chased by four VCs (and may spurn them all for a super-angel investor).
- A client that developed a superior e-commerce solution two years ago received a mid-seven-figure acquisition offer from a well-known software company – and immediately rejected the offer, having talked to an investor who said he would give the client a substantially higher valuation.
- A year-old life sciences company that hasn’t even completed development of its intellectual property – but which has a great underlying technology – is about to receive a low-seven-figures VC investment after putting little time and energy into fundraising.
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After several years of hard work, a client has gained so much traction that venture capitalists – on their own initiative – are asking to make an investment. When the first term sheet arrived, however, the founder / CEO was disappointed – the valuation was fine, but his ability to make significant decisions would be curtailed. I pointed out: If you accept venture capital, you will lost control of your company.
The loss of control does not result from a change in voting power: The VC will own a minority of the corporation’s shares and will control a minority of the seats on the board of directors.
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In an article published yesterday (“Money Rushes Into Social Start-Ups”), the Wall Street Journal reported that VCs are investing in companies that are taking social networking from computers to mobile phones. The rationale, according to the article (emphasis added):
Behind the spurt of new services is also the idea that the phone, carried by people at all times, can reinvent the notion of a social network by sharing more real-time information about where people are, what they’re seeing and even who they’re around.
Other points made in the article:
- Phones allow social experiences that are more personal in nature.
- Smartphones and tablets now are numerous enough that users can share experiences widely.
- At least one app completely dispenses with the idea of privacy – whatever you have in that app is shared automatically with everyone nearby who also has that app.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
This post is based on a question that I answered on Quora. Q. Which tax documents is a startup obligated to disclose to its investors? Our angel investor is asking to see the full tax return (Form 1120S plus all Forms 1099). What are his rights versus the corporation?
A. I’ll give a multi-part answer.:
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In an article published today (“Web Start-Ups Get Upper Hand Over Investors”), the Wall Street Journal reported (emphasis added) that “As venture capitalists scramble to get a piece of Silicon Valley’s new Web boom, entrepreneurs … are finding they have the upper hand.”
Here are some of the points the article makes about the latest Web boom:
- As VCs search for the next Facebook or Twitter, some entrepreneurs are positioned to have a greater say about how much they raise and deal terms.
- Bidding among VCs is driving up the price of many deals.
- Angel investors are driving up the prices of the tiniest early-stage companies.
- Some entrepreneurs are taking advantage of the situation by seeking the best advisors rather than the greatest amount of money.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
The evening of Wednesday, February 16, the Silicon Valley Association of Startup Entrepreneurs (SVASE) will present Raising the First Round at the beautiful Crow Canyon Country Club in Danville, California (tasty buffet dinner included). Description from the SVASE website:
Whether it comes from VCs, angels, or friends and family, the first round of funding always is a challenge. Listen to experienced investors as they explain what they are looking for in early-stage companies, and to successful entrepreneurs as they describe what leads to success and what doesn’t. Learn how to identify the right investors, where to find them, and ways to structure the first round to set the stage for the next one.
The panel:
- Randy Hawks, Claremont Creek Ventures
- David Stern, Clearstone Venture Partners
- Skip Glass, Foundation Capital
- Bipul Sinha, Lightspeed Venture Partners
Moderator: Riaz Karamali, Sheppard Mullin
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
The evening of Wednesday, January 19, the Silicon Valley Association of Startup Entrepreneurs will present “The Mobile Revolution”. Here is the description:
Mobile devices are revolutionizing how we consume content, conduct business and communicate. iPads/tablets, alone, were estimated to have sales of more than 20M units by the close of 2010 (Gartner). There are unprecedented opportunities for entrepreneurs and investors alike in location-based services, mobile advertising, apps, user-interfaces, security and countless other areas. Hear from our panel of VCs about opportunities they are focusing on and their investment criteria for mobile-market start-ups.
The event will take place at the beautiful Crow Canyon Country Club and will include a tasty buffet dinner.
Yesterday the Wall Street Journal published a fascinating article (Dear Contact: Send Cash) about a startup that obtained first-round funding of approximately $350,000 via LinkedIn.
The founder sent an appeal to his 700 contacts, offering ownership of 2% of his company in exchange for approximately $35,000. Within eight days, ten investors (the target number) were lined up
The founder must have had an impressive set of contacts. In any event, I’m impressed – this was a creative approach that saved the founder a huge amount of time.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
The evening of Wednesday, November 17, the Silicon Valley Association of Startup Entrepreneurs (SVASE) East Bay Series will present What’s Hot – What VCs Like and Why at the beautiful Crow Canyon Country Club in Danville, California (tasty buffet dinner included).
Description: To build a fundable company, you need to know the areas that investors are focusing on. Venture capitalists specialize in identifying important and lucrative opportunities before they become trends. So, what are VCs intrigued by today? Where will their money be invested? What is the effect of recent economic conditions? Learn what you will need to build a company that capitalizes on the latest developments.
Panel members:
- Skip Glass, Foundation Capital
- Saad Khan, CMEA Capital
- Additional panel members to be announced!
Check out all posts about SVASE.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
The evening of Wednesday, October 20, the Silicon Valley Association of Startup Entrepreneurs (SVASE) East Bay Series will present “Closing the Deal: Terms and Valuations” at the beautiful Crow Canyon Country Club in Danville, California (tasty buffet dinner included).
Description: A good deal is good for everyone. It isn’t just about how much the entrepreneur receives and what the VC takes. It’s about what each party brings to the table, shared risk, and shared reward. Hear what dealmakers say about getting the transaction done and done well. Our panel will discuss what you should expect regarding process, typical deal terms, how valuations really are set, and ways to anticipate and avoid obstacles.
Panel members:
Check out all posts about SVASE.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.