Jim Kelly, what does VC legal work entail?
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Poast new message in this thread
Date: November 21st, 2017 2:21 PM Author: Fragrant Ladyboy Community Account
drafting / negotiating agreements between companies and the VC and companies and other investors.
Helping with legal issues that pop up for portfolio companies.
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34740612) |
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Date: November 21st, 2017 2:39 PM Author: frozen hall messiness
cr. Investor-side it's negotiating the Term Sheet for the financing rounds (Series Seed, Series A, etc. or convertible notes) and then making sure the docs reflect the Term Sheet and are otherwise appropriately investor-favorable. As part of this, making sure that the founders' agreements, cap table, option plan, and IP assignments are in good shape. Very little other legal due diligence. If it's not the first round of VC financing, it's working with other investors if your client has anything odd that they need or if consent thresholds or other investor rights need to change -- this often ends up in business discussions but the lawyers will try to resolve it to save conflict. There's also reviewing things for portfolio companies once the investment has been made. Sometimes the VC will want its lawyers to review important agreements for its portfolio companies (big licenses, a debt facility, option plan, even routine consents, etc.). Then at the exit it's taking a look at the merger agreement (which company counsel hates because it's usually last-minute and we always have comments because no one has been reviewing from the investors' perspective and there will be an overbroad release or non-solicit or uncapped liability or something stupid).
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34740764) |
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Date: November 21st, 2017 2:49 PM Author: Fragrant Ladyboy Community Account
?
All that sounds pretty chill to me.
Litigation sucks.
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34740873) |
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Date: November 21st, 2017 2:57 PM Author: Fragrant Ladyboy Community Account
If you have a good library of templates, etc, I'd appreciate it if you can send over as much as you're wiling to.
<3
ChadChadChadington@gmail.com
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34740946) |
Date: November 21st, 2017 2:24 PM Author: poppy laughsome main people hell
Home office conference calls being interrupted by hapa kids and asian wife, similar to this
https://www.youtube.com/watch?v=p8nFR4sXkFE
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34740638) |
Date: November 21st, 2017 4:34 PM Author: coiffed cobalt senate
Any advice for someone evaluating a GC job at a venture funded startup? What things should you evaluate (aside from obvious stuff like comp, options, quality of investors)?
Assuming no exposure to venture funding, any good resources or just punt shit to outside counsel on the next financing round and let do?
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34741920) |
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Date: November 21st, 2017 4:49 PM Author: frozen hall messiness
I'd vet the company and tech with a tech person (ideally a VC "entrepreneur in residence" type -- someone who did it himself and now evaluates / helps others and has seen a lot and knows the industry well and where others are in the industry) to see what he thinks of the company. Lots of companies get funding now, and it's not always thoroughly diligenced if it's one of those FOMO VC investments. Also trust your gut on it. What stage is it? If it's late stage (C+), the equity might not be worth it. If it's early (Seed-B), the vast majority fail, either a full dissolution or some acquihire that takes the tech guys and the CEO and no one else gets anything except for maybe pennies on the dollar for the VCs if it's needed to get their consent -- it's a big risk for you v. a VC fund that invests in 30-50 companies in a numbers game.
Yeah, I'd get good counsel. Doesn't have to be one of the 5 biggest names, but you do want to make sure that you don't have associates who don't know shit working on your deals and juniors churning 2 days' of hours "reviewing" your docs for typos. If you go with one of those firms that offers $100K of free hours, those things are going to happen. I'd avoid that and just pay for the work.
Not sure about resources. Anything of substance is going to be handed to outside counsel (financings, separation agreements, big option plan matters). As a very practical item I'd automate what you can, like option grants, cap table matters -- either through WSGR's (or another firm's) software or eShares -> Carta if your firm doesn't have in-house software.
My biggest pet peeves with company-side clients is when they don't ask for advice because they saw someone say something on, e.g., Quora (e.g., we need RSUs! we need super-voting common stock!) or read that Zuck or Elon Musk did something a certain way and they should, too, and when everything is a fire drill for them -- e.g., at 2 p.m. "can I get this [totally non-urgent thing] by COB?"
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34742086) |
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Date: November 21st, 2017 11:50 PM Author: Beady-eyed Mentally Impaired Principal's Office
i fell into a counsel role for a startup and trying to fake it until i make it. A few q's:
1. startup is currently a DE LLC, and we're looking to move over to a C-Corp in preparation of outside capital. We are pre-revenue and no contracts (aside from some NDA's) have been signed yet. LLC doesnt have a company agreement, and three founders have been sloppily paying company expenses from personal credit cards, etc. my thought is that we dissolve the LLC and start a new DE C-Corp rather than do a conversion. agree? how would you treat the expenses incurred by the three founders? can the founders still take the losses (what they spent - which is not proportionate to their equity stake in the entity) on their personal tax returns?
2. in forming the DE C-Corp, thoughts on clerky.com vs. the "public forms" offered by Cooley (Cooley GO), Orrick, etc.? I'm literally new to this field, so i def need some help - which is why I'm looking at clerky. but is there another route to take?
3. Who would you recommend as solid counsel to assist without crazy rates?
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34745583) |
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Date: November 22nd, 2017 12:06 AM Author: frozen hall messiness
1.a. I don't know whether conversion or newco, but there's something about LLC conversions and debt (I think) -- but that's issue-spotting and nothing more. I guess this is where my lack of serious company-side experience shows. I'd seek tax advice (could be CPA) or advice from someone who does more company-side work. Have the founders signed IP assignments with the LLC?
1.b. Re: the expenses, it depends what they want. If they want the money back, then just do a very simple (1-page) promissory note with a 3-year term and the lowest interest rate permitted by law (short-term AFR). If they don't care about getting the money back, then I'd issue them SAFEs in the purchase amounts of the expenses paid to date. Up to you but SAFE with a reasonable discount (20%?) and an MFN is probably best/most flexible for this - just take the form of SAFE with a discount and add the MFN provision to it from the form of SAFE with an MFN.
1.c. I don't know. I'd seek tax advice on this question. If someone knows someone, great, or if not, one of the firms that advertises as "CPAs for startups." They will have lower rates than lawyers and are more likely to get to the right answer quickly.
2. I haven't compared all of the forms but I have seen clerky's and they're fine -- I'd just use those and wouldn't spend any more time thinking about this. I've directed potential clients to them when it didn't seem to make sense to pay our firm a few $k to do the same thing. There's always a chance that investors will want amendments, but you can deal with that then.
3. Do you really need outside counsel now? I'd almost wait until you get a term sheet (the first draft, not something that you've signed). There's nothing you're going to screw up so badly at this point that you need counsel. My throwaway is jim_kellyxoxo@hotmail.com if you want recs (not myself) in the future.
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34745689) |
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Date: November 22nd, 2017 12:17 AM Author: Beady-eyed Mentally Impaired Principal's Office
DUDE, really appreciate your time/advice.
1a - no IP assignments. finalizing the IP use agreement now, so it will be easy to just change the grantee entity to the newco rather than the LLC.
1b - this is interesting. so let's say that agreed upon startup capital is 100k. to date, 20k has been spent by founders in a sloppy way - paying with their credit cards on an ad hoc basis, etc. can we just do a prom note for what each founder has spent to date and assign the prom note to the newco? then shut down the LLC and forget about the founders taking losses on their tax returns. then when the newco generates revenue, the founders can recoup what they originally spent.
on this note, how does startup capital work? if three founders and two early employees (all with equity stake), does the 100k startup capital get divided by all 5 based on their respective equity shares? or only between the three founders? fyi, this will be a 34%-33%-33% equity split for the founders and then they will all get diluted slightly to account for the 10% being given to the two key employees.
2. should i go through clerky for creating a cap table, etc? or another software? again, at this point, its pretty simple - 3 founders for initial split of equity, then next level dilution will account for 2 key employees plus 20% option pool (i read this is necessary and we'll use it to award equity to board members, etc).
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34745753) |
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Date: November 22nd, 2017 12:34 AM Author: frozen hall messiness
No problem.
1a - Sounds good. Just make sure that the IP assignment is backwards-looking (i.e. that it picks up IP related to newco's business that was created prior to the date of the IP assignment / formation of newco). This can always be fixed, but better to get it right.
1b - I really don't know -- don't want to say something wrong and have some tax hit. A CPA (or maybe company-side attorney) would be more knowledgeable here.
Sorry - not sure what you mean by startup capital. Do you mean what's in the LLC's capital accounts?
2 - Google Sheets is fine for the simple cap table that you're talking about. When it's time for a 409A, sign up for Carta (fka eShares).
You mention an option plan and I said before that you can't really screw anything up at this point -- the one thing that you can screw up is not filing a 25102(o) with California for your option plan if you have grantees in California. When you adopt an option plan and issue options (the first time, not every time), make sure that you file the 25102(o) within 30 days and also that the company's shareholders approve the option plan within 1 year -- not doing those are problems.
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34745861) |
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Date: November 22nd, 2017 12:41 AM Author: Beady-eyed Mentally Impaired Principal's Office
yes startup capital = in capital accounts. if founders decide that 100k is optimal starting cash, and their equity split is 34-33-33, then do they contribute 34k, 33k, and 33k into the company? is that contribution strictly for the equity piece, or do they get something more (prom note?) in return? also, when i incorporate in DE, i'm using the lowest par value for the share (ie, classifying the entity as worthless). so if thats the case, in exchange for the founders' initial equity pieces, they will be req'd to only contribute a small amount (par value of 0.0001 - ish). so to get the 100k in for starting capital from the founders, should we then give SAFE's or prom notes to them?
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34745905) |
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Date: November 22nd, 2017 1:01 AM Author: frozen hall messiness
Capital accounts are for LLCs only, but with your facts above I'd do the following here:
1. Have them pay cash for the par value ($0.0001 * # of shares), pay a little bit more for the shares (maybe $0.0009 * # of shares) in the form of assigned IP. Don't assign the rest of the cash above as consideration for the shares because that will upwardly impact the FMV of the shares, which is undesirable for option grants.
2. For the balance (i.e. $33K or $34K - the nominal cash paid for the shares), I'd issue a SAFE to them. One with a reasonable discount and a MFN. If they want this money back near-term, then issue a promissory note (not convertible) for 3 years with interest at the short-term AFR or some other low rate.
3. Make sure they file 83(b) elections re: their shares if the shares are subject to vesting (and they should be subject to normal vesting -- clerky's form RSPAs have this as an option).
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34746003) |
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Date: November 22nd, 2017 1:04 AM Author: Hot black theater stage
If you have no direct relationships, find someone who does and get an intro. If you don't know anyone who has a network, apply to an accelerator.
Honest truth is that this stuff is super relationship based. Unless you come through a trusted intermediary it is super hard to get the attention of reputable investors.
(http://www.autoadmit.com/thread.php?thread_id=3804804&forum_id=2#34746019)
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