Fenwick & West LLP, a law firm that represents emerging growth companies, has published a survey of seed financing transactions, comparing the terms of such deals in 2011 to 2010. The survey was based on 56 transactions closed in 2011 and 52 – in 2010, mostly on the West Coast. The full text of the survey is found here: http://fenwick.com/publications/pages/seed-finance-survey-2011.aspx
The survey highlighted several trends that I would like to bring to your attention:
1. Venture capital investment into seed rounds increased by 52% from 2010 to 2011 (three most active investors were 500 Startups, SV Angel and First Round Capital).
2. Investing by angels has been on the rise since 2009.
3. There has been a mushrooming of accelerators/incubators for start-ups (and not just on the West Coast).
4. The deals tend to be more founder- friendly, as preferred stock valuations, convertible note usage and convertible note cap amount are increasing.
5. The seed funded companies have hard time receiving subsequent venture funding. In fact, less than half of the companies with seed funding received venture funding within 18 months.
6. The use of convertible notes increased by 10% in 2011 as opposed to 2010; their median size increased from $662,500 to $1 million; and the median valuation cap increased from $4.0 million to $7.5 million. Note that only in 4% of the convertible note deals in 2011 investors received a board seat, as opposed to in 8.3% of such deals in 2010.
7. The pre-money valuation in preferred stock offerings increased from $3.4 million to $4.0 million for internet/digital media deals.
Overall, the survey shows that the changes in the seed funding have been founder-friendly, which is an encouraging sign for the start-ups.
This post is a summary of the 2011 Seed Financing Survey, available here: http://fenwick.com/publications/pages/seed-finance-survey-2011.aspx. For any questions about it, please refer to the survey and contact its authors.
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.
Thursday, March 29, 2012
Monday, March 26, 2012
The JOBS Act Passed the Senate
On March 22, the JOBS (Jumpstart Our Business Startups) Act passed the U.S. Senate in a 73 to 26 vote. Since the Senate amended the version that passed the House, the bill now has to go back to the House of Representatives for another vote. President Obama has already indicated that he would sign this Act into law.
Among other things, the JOBS Act aims to facilitate investment by non-accredited individuals into startups. However, the last minute amendments to the crowdfunding provisions of the JOBS Act placed restrictions on the ability to raise capital by startups. One of such changes is the introduction of investment caps. According to the version of the bill passed by the Senate last week, individuals making less than $40,000 per year can only invest 2% of their annual income in startups, whereas those earning over $100,000 can only invest 10%.
These changes to the bill show that there is a tension between the growing need of startups for capital and the necessity to regulate crowdfunding to prevent fraud. It is unclear whether the House of Representatives will approve the current version of the Act.
Let’s wait and see what happens next.
The text of the Act and the amendments are available here: http://thomas.loc.gov/cgi-bin/bdquery/D?d112:3:./temp/~bssUuSy::
Read a good summary and discussion of the Act and the latest amendments here: http://www.avc.com/a_vc/2012/03/the-jobs-bill.html
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.
Among other things, the JOBS Act aims to facilitate investment by non-accredited individuals into startups. However, the last minute amendments to the crowdfunding provisions of the JOBS Act placed restrictions on the ability to raise capital by startups. One of such changes is the introduction of investment caps. According to the version of the bill passed by the Senate last week, individuals making less than $40,000 per year can only invest 2% of their annual income in startups, whereas those earning over $100,000 can only invest 10%.
These changes to the bill show that there is a tension between the growing need of startups for capital and the necessity to regulate crowdfunding to prevent fraud. It is unclear whether the House of Representatives will approve the current version of the Act.
Let’s wait and see what happens next.
The text of the Act and the amendments are available here: http://thomas.loc.gov/cgi-bin/bdquery/D?d112:3:./temp/~bssUuSy::
Read a good summary and discussion of the Act and the latest amendments here: http://www.avc.com/a_vc/2012/03/the-jobs-bill.html
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.
Monday, March 5, 2012
Penn Law Receives a Cease and Desist Letter from Louis Vuitton
Being a Penn Law graduate, I could not not write about this interesting recent development affecting the Law School.
Here is what happened: the IP student group at the University of Pennsylvania Law School (also known as Penn Law) organized an intellectual property law symposium "IP Issues in Fashion Law" scheduled for March 20th. They designed a flyer for the event using artwork that was a parody on Louis Vuitton marks. An image of the flyer can be found here as Exhibit A.
On February 29th, Michael Pantalony, the Director of Civil Enforcement for Louis Vuitton sent to Penn Law's Dean Michael Fitts a cease and desist letter regarding the flyer, available in the same pdf as above. In his letter, Mr. Pantalony claimed that the flyer was a "serious willful infringement" on LV's trademarks and that it "knowingly dilute[d] the LV Trademarks".
Robert Firestone, the Associate General Counsel of the University of Pennsylvania was quick to respond on March 2nd. In his letter, found here, Mr. Firestone disagreed with the statements made in the LV cease and desist letter. Mr. Firestone noted that the flyer couldn't possibly be a "serious willful infringement" since it wasn't used as trademark (the parody artwork in question was not used to identify any goods or services in interstate commerce). Also, it is unlikely that any of the LV trademarks were in class 41 that would cover educational symposia. Further, Mr. Firestone pointed out that even if the artwork were a mark, there is an explicit exception to any liability for dilution for any "noncommercial use of the mark". Finally, the artwork clearly constitutes a fair use.
Mr. Firestone also invited Mr. Pantalony to the symposium.
Penn Law, - I am proud to be your alum.
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.
Here is what happened: the IP student group at the University of Pennsylvania Law School (also known as Penn Law) organized an intellectual property law symposium "IP Issues in Fashion Law" scheduled for March 20th. They designed a flyer for the event using artwork that was a parody on Louis Vuitton marks. An image of the flyer can be found here as Exhibit A.
On February 29th, Michael Pantalony, the Director of Civil Enforcement for Louis Vuitton sent to Penn Law's Dean Michael Fitts a cease and desist letter regarding the flyer, available in the same pdf as above. In his letter, Mr. Pantalony claimed that the flyer was a "serious willful infringement" on LV's trademarks and that it "knowingly dilute[d] the LV Trademarks".
Robert Firestone, the Associate General Counsel of the University of Pennsylvania was quick to respond on March 2nd. In his letter, found here, Mr. Firestone disagreed with the statements made in the LV cease and desist letter. Mr. Firestone noted that the flyer couldn't possibly be a "serious willful infringement" since it wasn't used as trademark (the parody artwork in question was not used to identify any goods or services in interstate commerce). Also, it is unlikely that any of the LV trademarks were in class 41 that would cover educational symposia. Further, Mr. Firestone pointed out that even if the artwork were a mark, there is an explicit exception to any liability for dilution for any "noncommercial use of the mark". Finally, the artwork clearly constitutes a fair use.
Mr. Firestone also invited Mr. Pantalony to the symposium.
Penn Law, - I am proud to be your alum.
This article is not a legal advice, and was written for general informational purposes only. If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga. Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.
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