4 stanton financing options

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4 stanton financing options

  1. 1. Financing Options Scott M. Stanton Partner Morrison & Foerster LLP Lab to Launch – San Diego
  2. 2. Choosing the Best Entity for Your Venture• Corporations and Limited Liability Companies – Both have limited liability for owners/managers – Tax treatment can differ • C Corporation’s earnings are taxed at corporate level • S Corporation and LLC are pass-through entities – Corporations are more common as investment vehicle in start-ups• Delaware vs. California Lab to Launch – San Diego
  3. 3. Control Issues• Corporations – Stockholders – Board of Directors – Officers• Limited Liability Companies – Members – Managers – Managing Members – Officers
  4. 4. Contributions to the Venture• Intellectual Property – Clearly defined assignment – Patents – Business plans – Licenses• Capital – Adequacy and segregation to avoid piercing the corporate veil• Keep the Stated Value Low
  5. 5. Equity on Formation• Authorized vs. Issued• Common vs. Preferred• Founder Stock – Pricing – Vesting • Upfront and Term • Acceleration – Repurchase rights
  6. 6. Sources of Funds• Yourself • Angels• Friends & Family • Crowd Funding• Seed Capital • Equity Crowd• Bank Loans Funding (coming)• Government Grants • VC’s• Business/Trade • Strategics Credit
  7. 7. Legal Issues of Offering Securities• No General Solicitation (for now)• Accredited Investors• Unregistered Finders• Crowdfunding with equity • Registered Portals • $1M per year • Investor limits – Income/net worth tests – Max of $100k if investor income/net worth over $1M
  8. 8. ValuationPre-Money Valuation $900,000 90%+Investment Amount 100,000 10%=Post-Money Valuation $1,000,000 100%Pre-Money Valuation $200,000 67%+Investment Amount 100,000 33%=Post-Money Valuation $300,000 100%
  9. 9. Types of Securities• Straight Debt• Convertible Debt• Preferred Stock• Warrants• Options
  10. 10. Financing Terms• Board Representation• Approval Rights• Liquidation Preference• Anti-dilution• Financing Participation Rights
  11. 11. Thank you.Presented by Scott Stanton, Morrison & Foerster LLPsstanton@mofo.com Lab to Launch – San Diego

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