Stockholders of Delaware corporations for many years have had the right to examine stock ledgers, stockholder lists and “books and records” for a “proper purpose” under Section 220 of the Delaware General Corporation Law. Until recently, however, the concepts of
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(Minimum Investment) Size Matters, When it Comes to Rule 506(c) Verification
Before 2013, issuers were prohibited from using any means of general solicitation or advertising when raising capital in the private markets. The prohibition was perceived by many to be the single biggest impediment to raising capital privately, particularly since it
Crypto Collectibles: Meme Coins Deemed Not Securities by SEC Staff
According to crypto platform Kraken, the aggregate market cap for all meme coins is over $70 billion. Five meme coins would be considered unicorns (market cap over $1 billion) if they were startups. Dogecoin’s market cap is $35 billion. Social
Beyond the Discount: Why Maturity Terms Matter in Convertible Notes
When negotiating convertible notes, parties typically focus on the terms of conversion upon an equity financing, most notably the discount and valuation cap. This is understandable inasmuch as the not-so-hidden secret of convertible notes is that no one wants the
Cap Table Confidential: Should Startup Employees Get a Peek?
I’m often asked whether employees should have access to the company’s cap table. The cap table is one of the most sensitive and critical documents in any startup. At its most basic level, it lays out who owns what –
From Algorithms to Altruism: Risks and Rewards of xAI’s Benefit Corporation Strategy
The Wall Street Journal recently reported that xAI, the artificial intelligence startup founded by Elon Musk, completed a funding round of $5 billion at a pre-money valuation of $45 billion ($50 billion post-money). Rumored to participate in the round according
Stockholders’ Agreements for Startups: When to Sign, When to Skip
I’m often asked by clients whether startups should have a separate stockholders’ agreement among the founders. The answer largely depends on whether they have or will have certain other startup documents in place.
First, some background on stockholders’ agreements. These
“Draft Dodging”: Approving “Nearly Final” Merger Agreement Becomes Dangerous in Delaware
The board of directors of any Delaware corporation proposing to merge is required under Delaware law to adopt a resolution approving the merger agreement. In the real world of M&A practice, however, the version of the merger agreement presented to
Planting Seeds: New Standard Convertible Note Could Disrupt Angel Investing
In the world of early stage investing, there exists a range of structures from the most founder friendly to the most investor friendly.
The most investor-friendly structure involves some type of a priced round in which the investor receives shares
Navigating the Downside: The Rise of Down Rounds in 2024 VC Deals
I had a chance to sift through Pitchbook’s U.S. VC Valuations Report for the first quarter of 2024. The data point that really jumped out at me was the increase in down rounds. The number of flat and down