The High-touch Legal Services® Blog…for Startups!

© 2009-2014 Dana H. Shultz, Attorney at Law

Vator Splash Oakland – May 6-7 – Special Discounts Available

Logo for Vator Splash OaklandVator Splash Oakland – a two-day startup competition and educational event – will take place May 6-7, 2014 at Jack London Square.

Readers of this blog are entitled to a 35% discount on all tickets except Scrappy Observer and Afterparty, which already are greatly reduced. Use discount code Schulz5. (more…)

Kickstarter Rejects Foreign Entrepreneurs

Kickstarter logoKickstarter is a funding platform for creative projects. Recently, I have seen a surge of interest among foreign companies wishing to set up Kickstarter projects in the US. This post discusses the challenges those companies will face.

Kickstarter Creator Requirements

Kickstarter has the following creator requirements in the US:

  1. You are 18 years of age or older.
  2. You are a permanent US resident with a Social Security Number (or EIN).
  3. You have a US address, US bank account, and US state-issued ID (driver’s license).
  4. You have a major credit or debit card.

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Nonbank Lenders Increasingly Attractive to Small Businesses – WSJ

Logo for WSJ.com, which published an article about nonbank lendersNonbank lenders are becoming increasingly attractive to small businesses, according to an article published today in the Wall Street Journal. (Alternative Lenders Peddle Pricey Commercial Loans)

The nonbank lenders cited in the article include OnDeck Capital Inc., Kabbage Inc., CAN Capital Inc. and Business Financial Services Inc.

Loans Offered by Nonbank Lenders

Nonbank lenders offer loans that typically are for less than $50,000 and have high interest rates – sometimes more than 50% per year. The article says that such loans, nevertheless, are popular for the following reasons.

Pitch Coaches Teach How to Sell in the US

Logo of WSJ.com, which ran an article about pitch coachesIn a recent article (Foreign Entrepreneurs Learn Art of the American Pitch), the Wall Street Journal discussed the role of “pitch coaches” who help foreign entrepreneurs promote themselves in the US. While the article focused primarily on pitches to investors, it applies to selling one’s business to clients and colleagues, as well.

The thrust of the article is that selling in the US is different from selling in other countries. In my work with international clients, I have seen the same thing.

Here are some of the ways that pitch coaches say pitches need to be tailored to work best in the US.

Social Media and Investors – WSJ Explains How

Logo of WSJ.com, which published an article about social media and investorsIn an article published today, the Wall Street Journal discusses how social media and investors can come together for the benefit of startup entrepreneurs. (If You Look Good on Twitter, VCs May Take Notice)

According to the article, more “venture capitalists are taking social media into consideration before they decide to pour millions of dollars into a startup” [emphasis added].

The article includes the following eight tips [emphasis added] for how to bring a startup’s social media and investors together most effectively.

  1. (more…)

When a Handshake Deal Isn’t Really a Handshake Deal

Logo for Y Combinator, which announced The Handshake Deal Protocol

Last week Y Combinator announced The Handshake Deal Protocol. A “handshake deal” is an oral commitment to a funding transaction between a startup’s founders and an investor. The handshake deal is necessary in Silicon Valley because, in the world of startups, one must move quickly.

As Y Combinator notes, however, a handshake deal can create problems:

Unfortunately, things don’t work as smoothly in Silicon Valley as among diamond dealers. This is not a closed community of pros who deal with one another day after day. Many participants in the funding market are noobs, and some are dishonest.

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Class F Shares: A Good Idea?

Logo of the Founder Institute, which invented Class F shares

A client told me that she wants to include Class F shares in the Certificate of Incorporation for her Delaware corporation. This post describes how we concluded that – for this client, at any rate – Class F shares were not a good idea.

Class F Shares – History

Class F shares were invented by the Founder Institute several years ago to protect founders largely against investors, especially VCs. (See If You Accept Venture Capital, You will Lose Control of Your Company.) Class F shares provide 2:1 board votes per founder versus normal board members, and 10:1 share votes as compared to normal common shares. (more…)

WSJ: VCs Reducing Appetite for Risk

WSJ.com logo

In an article published today (Venture Capital to Suppress Its Appetite for Risk in 2013), the Wall Street Journal reports that venture capitalists have dramatically lowered their appetite for risk, reducing the power of Internet entrepreneurs who are seeking funding.

The article notes that:

  • In light of disappointing stock-market performance of Facebook, Zynga and Groupon, VCs are investing less in consumer Internet companies.
  • During the past year, valuations have gone down significantly.
  • On a quarter-over-quarter basis, the number of deals, the amount invested and the percentage of “up” rounds all have declined.

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WSJ: Most Accelerators Are of Doubtful Value

WSJ.com logo

Accelerators offer entrepreneurs seed funding and one-to-one mentoring in exchange for an equity stake, making a profit when some of their startups receive institutional (VC) funding. However, according to a Wall Street Journal article published yesterday (Start-Ups Crowd ‘Accelerators’), most accelerators – especially those outside Silicon Valley, Boston and New York – are of doubtful value.

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WSJ: How to Ask Friends and Family for Money

Logo for WSJ.com, which published an article about asking friends and family for money

Yesterday the Wall Street Journal published an informative piece about asking people you know and love (i.e., friends and family) for a loan (Do’s and Don’ts of Asking Friends for Money). Here is a recap of the tips offered by experts quoted in the article:

  • Put yourself in the lender’s shoes.
  • Borrow the money as you would from a bank.
  • Bring in a lawyer to draw up the agreement.
  • Ask for more money than you think you need.
  • Assume the worst.
  • Remember “Hamlet”. ["Neither a borrower nor a lender be...."]

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.