Accelerator Law 101 – Part 2

In our previous post, we discussed the issues that come up when structuring an accelerator investment. Keeping that in mind, we have prepared a comparison of some of the investment terms used by leading accelerators in the U.S. and Europe.

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Accelerator Law 101 – part 1

Getting into an accelerator program is a great opportunity to jumpstart a startup by allowing it to gain access to excellent mentorship and exposure. However, apart from the accelerator services themselves, it is crucial to pay close attention to the terms contained within the accelerator investment documents, as there are various issues to be on the lookout for from a legal standpoint. In this post, we will discuss some of the main terms for startups and accelerators to consider when contracting with one another, as well as issues that come up prior to and after the investment itself. Pre-investment issues Structuring the investment One, if not the main issue surrounding accelerator investments is determining how the investment itself should be…

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The Anatomy of a Unicorn – part 2

Previously, we discussed the main ways of handling founder and investor preferences when structuring a company, as seen in some of the world’s leading unicorns. For your convenience, we have put together a table comparing the key similarities and differences in various provisions of the COIs of Uber, Facebook prior to its IPO, Snapchat, AirBnB and Palantir.   Uber Facebook Snapchat AirBnB Palantir Two Classes of Common Stock for Founders Yes Yes Yes Yes Yes Liquidation preference Non-participating preferred Non-participating preferred Non-participating preferred (for Series A, A-1, B, C) Non-participating preferred Non-participating preferred Multiple in liquidation preference 1.25x for Series C-2 and C-3 Preferred 1x 1x 1x 1x Investor relations in liquidation preference Pro rata Pro rata Pro rata Pro…

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The Anatomy of a Unicorn – part 1

Everyone is aware of the dramatic growth and success attributed to companies such as Uber and Snapchat. However, not everyone may be aware of the structures used by those companies that allow for such development and progress. We did the heavy lifting for you and compared certificates of incorporation of five leading unicorns: Facebook, prior to its IPO, Palantir, Snapchat, Uber, and AirBnB. Our findings have revealed that key to the anatomy of the unicorns lay in similar founder preferences and down road economic protections for the companies’ investors. We will briefly discuss these founder and investor preferences, as found in the certificates of incorporation. Founder Preferences A unicorn tends to have a founder-friendly anatomy. This is accomplished by giving founders…

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DOWN-ROUND FINANCING

Why Down-Round Financing? Down-round financing occurs when stock of a company is sold at a lower price per share than it was sold during a previous financing. Although having to choose to do a down-round may not be an ideal outcome for a company, it is a tool that comes in handy when a company is seeking new investors in times of necessity, economic uncertainty or in a chilled fundraising environment. The legal aspects of a down-round can be challenging tactically and strategically for founders and investors. Structuring a Down-Round Regardless of a company’s reason for opting to sell stock at a lower price than in its previous financing rounds, once such a decision has been made, there are various…

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Financing in the Valley and Europe – Big Differences

We keep running into clients asking what the big differences are between financing a startup in Silicon Valley and Europe. In this post we wanted to highlight a couple of these differences. Tranche You should be aware that many seed financings in Europe are structured as tranche deals. This means the VC releases money only if certain milestones or KPIs are satisfied, indicating that a seed round is essentially similar to multiple different financings. The VC exclusively determines whether the startup hit the milestone. European style tranche deals have a negative impact on company valuations and the dynamic between entrepreneur and VC. For example, tranche financing locks in previous valuations in a changing world. Practically speaking, each tranche is a…

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 Regulation A+ and start-up financing

The change. Loud pops were audible across the globe as countless bottles of champagne were uncorked in reaction to the announcement of the latest version of the Regulation A+. Adoption of the final rule by the SEC will provide emerging companies with a new, convenient path to raise substantial capital by offering their stock to large audiences. The Regulation A+ sets forth two tiers of offering processes: The “Tier 1” path, available to all companies conducting offerings of up to $20 million in a 12-month period, with not more than 30% in offers by selling security-holders that are affiliated with the company ($6 million in the case of a $20 million offering). The “Tier 2”, available in turn to all…

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Planned Pregnancy with Strangers

Dear Cytowski LLC, I’ve been a single startup for months and I am desperate to set up a traditional family with a venture capitalist I’ve been hoping for. If I were to take a vacation, go to the Valley and have unprotected investments with 5-7 VC strangers in order to get pregnant with funding, whose consent should I be asking for? Do the VCs have a right to know what I’m trying to do? I’m not looking for child support (aka Series-A, Series-B), an involved father (Marc Andreessen), or even to know whose investment, exactly, lands inside me. I just need to kickstart my startup to make this happen. — Anonymous Startup Dear AS, The investors out there who will…

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Stop being paralyzed by the FDA scare and get your medical device to the U.S. market [part 2].  

This is the second part of our short informational series on FDA procedures for approval of medical devices. In our previous post we have analyzed what makes your product a medical device and its three possible classifications depending its type and application. Below we cover the most confusing and at the same time interesting part, i.e. the consequences of being assigned to one of the three classes and the resulting formalities you will need to take care of. The applicable standards in the context of the market entry. Class I The most lenient standard applies in this case. Apart from few particular products, most of the devices in this class are exempt from any premarket notification or approval requirements. Remember…

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Stop being paralyzed by the FDA scare and get your medical device to the U.S. market [part 1]

One of the most problematic issues for the med-tech startups is what to do in order to legally access the fertile U.S. market, i.e. how to obtain the Food and Drug Administrations’ (FDA) approval for their product. This problem seems to be overwhelming some of our European clients what slows down their businesses and hinders the American healthcare. Because we care about both we have decided to write this short series of two informational blog posts. Ok, so you have a product and you want to bring it to the American market. What now? There are two main questions you need to answer, firstly, whether your product is indeed a medical device and, secondly, how it is classified by the…

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