All Posts: ‘Securities Law Issues’

Convertible Note Seed Financings: Founders Beware!

by Scott Edward Walker on May 15th, 2012

This post is the third part of a three-part primer on convertible note seed financings.  Part 1, entitled “Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask),” addressed the basics.  Part 2, entitled “Convertible Note Seed Financings: Econ 101 for Founders,” addressed the economics.  This part will address certain tricky issues.

[This post was originally published on TechCrunch.]

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Fundraising 101: Checklist for Entrepreneurs

by Scott Edward Walker on May 9th, 2012

I’ve been a corporate lawyer for 18+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs repeatedly make in connection with fundraising.  Accordingly, I thought it would be helpful to provide a simple checklist tailored to first-time entrepreneurs.  I’ve also included links to prior posts for a detailed discussion.

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Raising Capital? 3 Tips for Entrepreneurs (Part 3)

by Scott Edward Walker on October 20th, 2011

I’ve been helping entrepreneurs raise capital as a corporate lawyer for 17+ years, and there are certain fundamental legal mistakes that I’ve seen entrepreneurs repeatedly make.  Accordingly, I thought it would be helpful to share three tips for entrepreneurs in connection with raising capital.  This is part three of a three-part series, which was  originally published on The Huffington Post.

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Raising Capital? 3 Tips for Entrepreneurs – Part 2

by Scott Edward Walker on September 21st, 2011

I’ve been helping entrepreneurs raise capital as a securities lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs repeatedly make.  Accordingly, I thought it would be helpful to share three basic tips for entrepreneurs in connection with raising capital.  This is part two of a three-part series, which was originally published on The Huffington Post.

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Raising Capital? 3 Tips for Entrepreneurs

by Scott Edward Walker on June 30th, 2011

Introduction

I’ve been helping entrepreneurs raise capital as a securities lawyer for 17+ years, and there are certain fundamental legal mistakes that I’ve seen entrepreneurs make over and over again.  Accordingly, I thought it would be helpful to share three basic tips for entrepreneurs in connection with raising capital.  (Note: this post was originally published on The Huffington Post.)

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Can I Raise Funds via Facebook or LinkedIn?

by Scott Edward Walker on March 17th, 2011

As a corporate lawyer for entrepreneurs, I am frequently asked: “Hey Scott, can I raise funds for my new company via Facebook or LinkedIn?  I have lots of friends and connections, and I know some of them would be interested in investing.”  The short answer is no (except in rare circumstances) because it would violate securities laws.

 

 

 

 

 

 

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Can I Raise Money for My Startup via Twitter?

by Scott Edward Walker on January 5th, 2011

Introduction

I get this question all the time (in one form or another): “Hey Scott, can I raise money for my startup via Twitter?  I have a lot of followers, and I know some of them would be interested in investing.”  As discussed below, the answer is no — unless the tweet is a direct message (a “DM”) to a follower with whom you have a substantive, pre-existing relationship. 

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“Ask the Business Attorney” – What Are the Biggest Legal Mistakes Startups Make Raising Capital?

by Scott Edward Walker on July 7th, 2010

Introduction

This post was originally part of my “Ask the Attorney” series which I am writing for VentureBeat; below is a longer, more comprehensive version.  I know this stuff tends to be very technical (and perhaps boring), but it is nevertheless critical that entrepreneurs have a basic understanding of the securities laws.

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A Personal Letter to Senator Dodd Regarding His Anti-Angel Investment Bill

by Scott Edward Walker on March 31st, 2010

Below is a copy of the letter I just emailed to Senator Dodd’s office with respect to his new financial regulatory reform bill and its material adverse effect on angel investments. 

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“Ask the Attorney” – Beware of Finders

by Scott Edward Walker on February 24th, 2010

Introduction

This post is part of my weekly “Ask the Attorney” series which I am writing for VentureBeat (one of the most popular websites for entrepreneurs).  As the VentureBeat Editor notes on the site: “Ask the Attorney is a new VentureBeat feature allowing start-up owners to get answers to their legal questions.”

I have two goals here: (i) to encourage entrepreneurs to ask law-related questions regardless of how basic they may be; and (ii) to provide helpful responses in plain English (as opposed to legalese).  Please give me your feedback in the comments section.  Many thanks, Scott

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“Ask the Attorney” – Securities Laws

by Scott Edward Walker on January 12th, 2010

Introduction

This post is part of a new series entitled “Ask the Attorney,” which I am writing for VentureBeat (one of my favorite websites for entrepreneurs).  As the VentureBeat Editor notes on the site: “Ask the Attorney is a new VentureBeat feature allowing start-up owners to get answers to their legal questions.”

The goal here is two-fold: (i) to encourage entrepreneurs to ask law-related questions regardless of how basic they may be; and (ii) to provide helpful responses in plain english (as opposed to legalese).

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Rescission Offers: Five Tips For Entrepreneurs

by Scott Edward Walker on November 24th, 2009

In light of the Madoff affair and other significant external pressures, the Securities and Exchange Commission (the “SEC”) and State securities law commissions and departments are dramatically stepping-up enforcement of securities laws.  Indeed, there is a heightened level of regulatory scrutiny that entrepreneurs need to be aware of as they struggle to raise capital during this difficult economic period.  I have discussed the most common securities law violations in a relatively recent post: “Five Common Mistakes Entrepreneurs Make in Raising Capital”; and as I pointed out in “Mistake #1”, non-compliance with applicable securities laws could result in serious adverse consequences. (more…)

Sec Form D And Related Securities Laws: Q&A For Entrepreneurs

by Scott Edward Walker on November 3rd, 2009

As I mentioned in a recent post, one of things that surprised me when I moved to Southern California from New York City in 2005 was the lack of sophistication of some of the players in the so-called “middle market.”  Indeed, I was particularly surprised to see so many investment bankers and other intermediaries running around and raising capital for private companies without being registered as a “broker-dealer” with the Securities and Exchange Commission (the “SEC”).  As I have previously discussed (see mistake #4 here ), this is a huge potential problem for the issuer, particularly in light of the recent changes to SEC Form D.  Accordingly, I thought it would be helpful to entrepreneurs to provide them with a basic understanding of the new, revised Form D and related securities laws via a question-and-answer format.  (more…)

Five Common Mistakes Entrepreneurs Make In Raising Capital

by Scott Edward Walker on September 21st, 2009

This post discusses the five most common mistakes entrepreneurs make in raising capital: (i) playing securities lawyer; (ii) selling securities to non-“accredited investors”; (iii) advertising or soliciting investors; (iv) using an unregistered finder to sell securities; and (v) selling preferred stock to angel investors.  The abridged video version is directly below. 

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Launching A Venture: Ten Tips For Entrepreneurs

by Scott Edward Walker on September 15th, 2009

Below are ten tips for entrepreneurs who are launching a startup that will seek venture capital (“VC”) financing.

1.  Protect Yourself from Personal Liability.  The entrepreneur’s first step in connection with launching a startup should be to form an entity that will protect against personal liability.  As discussed below, a Delaware C-corporation is generally the recommended choice; however, in certain rare circumstances, it may be prudent for the entrepreneur to form an S-corporation or a limited liability company to obtain “pass-through” tax treatment (and then convert the entity to a C-corporation down the road, if necessary).  The bottom line is that the entrepreneur should seek the advice of corporate and tax counsel in connection with the formation of any business organization (e.g., shareholders in S-corporations — as opposed to C-corporations — are not eligible for the “qualified small business stock” capital gains tax break; and losses in C-corporations may be deductible up to $50,000/yr. or $100,000/yr. on a joint return with respect to “Section 1244 stock”). (more…)