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Asaf hahami


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Published in: Business, Economy & Finance
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Asaf hahami

  1. 1. A Guide for Israeli Start-Up Companies Entering the U.S. Market Through New York StateThrough New York State Key Legal and Business Issues Asaf Hahami, Esq. April 30, 2014
  2. 2. The New York State Start-Up Scene “Start-Up New York” Program –– New York City – Silicon Alley, Cornell Technion/Google Expansion in West side of Manhattan/Midtown East expansion/Tech and life science hub Brooklyn Upstate – Capitol Region – Albany – Collaboration Western New York – More than a frontier, but a growing Start-Up ecosystem near Niagara Falls and Canadian tech hub 43North – World’s largest business plan competition in America’s most affordable City (Buffalo)
  3. 3. Market Potential and Trajectory Entrepreneurs from Israel set up between 600-700 new tech companies each year. Israel has 6,000 or so active start-ups, butcompanies each year. Israel has 6,000 or so active start-ups, but only 1,000 of those successfully raise venture capital locally, according to IVC Research Center. Some of those have unique IP. Many Israeli companies already in U.S. (Silicon Valley, Boston, NYC – estimated 200 Israeli tech start-ups are in NYC alone); 65 Israeli companies on NASDAQ. Attractiveness of New York State as Market Entry Point – diversity, size, types of markets, breadth of industries, etc. Typical Trajectory of Israeli company entering the U.S.
  4. 4. What An Israeli Company Needs to Enter U.S. Market Money – refer you to 43North and other investors Support – 43North accelerator program and other acceleratorsSupport – 43North accelerator program and other accelerators Access to U.S. Market – need for market penetration – Requires commitment of executives and dealing with host of legal and business issues
  5. 5. Questions About Entering U.S. Market If you are an Israeli founder thinking about a move to a larger market, how do you enter the U.S. market? What is yourmarket, how do you enter the U.S. market? What is your roadmap? How do you establish and capitalize a subsidiary or other U.S.-based entity? What key legal and business issues do you have to worry about as you leap into the U.S. market (corporate structure, tax, finance, operations, marketing, employee/HR issues, intellectual property protection, immigration)? What are the rules of the road that you must think about?
  6. 6. Formation & Tax Planning Delaware “C” Corporation with authority to do business in New York StateNew York State C Corp as preferred vehicle for Israeli subsidiary in U.S. and for venture capital financing from U.S.-based funds Limited Liability Company – Advantages and disadvantages U.S. tax issues vs. Israeli tax issues
  7. 7. Tax Treaty and IP Issues U.S.-Israel Tax Treaty Intellectual Property Location, Transfer and Sale Issues
  8. 8. Venture Capital Financing Features of Preferred Stock % “Interest” on Investment Liquidation PreferenceLiquidation Preference Participating Preferred vs. Convertible Preferred Anti-Dilution Protection Formulas Dividend Rights (simple vs. cumulative/accruing) Conversion Rights Special Voting Rights Redemption Rights
  9. 9. What’s Left for Founders and Employees? Sweat equity gets common stock. Capital gets rights, preferences, privileges and protections ofCapital gets rights, preferences, privileges and protections of preferred. Founders and employees get potential for upside and incentive to drive up enterprise value.
  10. 10. Employees in the U.S. Will have to deal with a host of applicable U.S. federal, state and local laws and regulations.local laws and regulations. Ensure proper employment agreements with confidentiality and IP assignment agreements in place Document employee grants to avoid diligence problems down the road Employees vs. Independent Contractors: Your company does not want to be in a situation where your independent contractor is later found to be an “employee” for federal and/or state law purposes, so avoid penalties.
  11. 11. Equity Incentives Stock Options Restricted StockRestricted Stock Vesting Change of Control Employer Protections – Limited window to exercise stock options, repurchase rights, rights of first refusal, drag along 83(b) Issues
  12. 12. Space and Real Estate Leases/Equipment Leases Accelerator Programs Real Estate LeasesReal Estate Leases – Written lease – Dealing with landlords – Limits of use of property – What happens in a change of control? Equipment Leases
  13. 13. Intellectual Property Protection in the U.S. Investors, acquirers and commercial partners will perform due diligence of your company’s intellectual property protection in the U.S.the U.S. – Does the Israeli company really own the IP? Can third parties step in and claim ownership? IP Assignment Agreements – differences when involving individual, previous employer, university, government Patents Trade Secret – what is protectable? Trademarks and Service Marks Copyrights
  14. 14. Data Security and Privacy – the U.S. Legal Framework U.S. federal privacy laws HIPAA for health informationHIPAA for health information Gramm-Leach-Bliley Act (GLBA) for financial activities Children’s Online Privacy Protection Act (COPPA) and FTC guidelines State privacy laws Data security requirements Privacy policies
  15. 15. Other Issues Customs Commercial law issues – unique contractual issuesCommercial law issues – unique contractual issues Distribution agreements Joint ventures Sales representative laws in various states, and payment of commission Additional securities law issues as company grows Antitrust issues (for larger companies)
  16. 16. Immigration Status While in U.S. F-1 Immigrant Student Entrepreneur L-1 Visa for Intra Company TransfereesL-1 Visa for Intra Company Transferees L-1 New Office E-2 Treaty Investor H1-B Specialty Occupation EB-5 Immigrant Investor
  17. 17. For Further Information, Contact: Asaf Hahami, Esq. Phillips Lytle LLPPhillips Lytle LLP The New York Times Building 620 Eighth Avenue, 23rd Floor New York, NY 10018-1405 Email: Office: (212) 508-0432 Mobile: (917) 648-5060