Thoughts on startups by investors that
fund them & entrepreneurs that run them

Blog Archives

Is it legal to have a crowd-funding site that gives equity as reward?

In the United States, equity-based crowdfunding will not be legal until January, 2013 at the earliest, when the SEC issues its rules regarding the process. It will then be permitted, provided that it is done in strict compliance with those SEC rules, and the provisions of the JOBS Act, which was signed by President Obama earlier this year.

*original post

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Thinner Slices of an Extra-Large Pizza: Mathematical vs. Economic Dilution of Startup Equity

Back from a hiatus, it’s time to venture forward once more.  I appreciated hearing from those who asked about upcoming posts.  Thanks in particular to the reader who reminded me that Part II of “Bored” of Directors Can Become Clash of Titans is still in the queue.

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in

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Sprint Like An Egyptian: A Tech Entrepreneurship Revolution in Alexandria

At the threshold of one of the most recognizable landmarks in human history — the sole survivor among the Seven Wonders of the Ancient World, dating back nearly five thousand years — my entrepreneur host was engaged in heated debate with a rotating phalanx of functionaries.  As our group sweltered in the July heat on the outskirts of Cairo, each

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Copywrong Again: Founding the Next Pinterest or Napster?

As I wrote in Part I of this post, many of the most creative and disruptive startup businesses in recent years have involved the use of intellectual property in innovative, non-traditional ways that defy easy categorization and stretch the boundaries of concepts such as the fair use doctrine in copyright. When presented with a product or service in development, we often have to admit that there

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Copywrong: Brilliant, Disruptive, Illegal Business Plans

Entrepreneurs tend to focus on opportunity rather than risk, and rightly so.  As Steve Blank has written, at its core, a startup is an organization formed to search for a repeatable and scalable business model.  In the lexicon of the lean startup movement, once “product-market fit” has been achieved, the focus shifts to scale and execution as the startup matures

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When Good Legal Advice Is Worth $10 Million An Hour

One of the highest profile liquidity events to date in 2012 is Facebook’s announced deal to acquire Instagram for $1 billion.  The popular mobile photo-sharing service should fit well into Facebook’s growth strategy as a soon-to-be-public company, but its eye-popping valuation — more than that of the New York Times, for those keeping score at home — is made more

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The Problem with Private Placement Memorandums (PPMs)

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Reg D).  A Private Placement Memorandum (PPM) is a special business plan defined to meet an SEC exemption.  In most cases, those entrepreneurs choosing to raise capital using PPMs

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The Great Crowdfunding Train Wreck of 2013

The verb “to disrupt” in all its forms is rightly popular in the startup world.  To many entrepreneurs, few things are as personally satisfying (or as lucrative) as disrupting an entrenched, complacent, monopolistic, inefficient or stagnant market in ways that often empower consumers and producers alike.  Consumer Internet and mobile technology businesses continue to be rife with opportunities for disruption.

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Heart-Attack Tax Season for Delaware Startups

It’s that time of year again:  Tax season.  In addition to the headache of personal income taxes, entrepreneurs have to deal with business taxes.  Around this time each year, as sure as the sunrise, I get calls and messages from irate founders of new startups who received franchise tax bills from the State of Delaware for an insane amount like

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Veering Off the Beaten Path Into Murky Legal Waters

Path, a high-profile San Francisco social media startup, ignited a firestorm this week with the revelation that its mobile application uploads users’ entire iPhone address books to the company’s servers without their knowledge or permission.  The practice, discovered by Singapore developer Arun Thampi, provoked outrage within the user community and was broadly condemned by the tech business press.  Jon Mitchell at ReadWriteWeb wrote

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