Acquisitions of unicorns, i.e. young tech companies valued at over $1 billion, were a hallmark of 2014. These acquisitions continue to be surprising both in their enormity and frequency. For example, Facebook Inc. acquired the messaging group WhatsApp Inc. for a whopping $19 billion, and then also acquired virtual reality company Oculus VR Inc. for $2 billion. Google Inc. acquired smart-thermometer marker Nest Labs Inc., and other investments, for $3.2 billion. Microsoft Corp. acquired Minecraft game maker Mojang AB for $2.5 billion.
Late-Stage Protection for Investors Can Inflate Start-Up Valuations
SIDECAR: Small Startup With Big Ideas, a Leading Innovator in Ridesharing Technology
Stripe’s Role in the $720 Billion Mobile Commerce Market
In 2010 two brothers from Dromineer, Ireland followed the Zuckerberg dream, dropping out of MIT and Harvard to move to the San Francisco Bay Area and build a start-up, Stripe Inc. Four years later, having raised $140 million in funding from a line of investors including the co-founders of PayPal, the payment processing company is now valued at $1.75 billion.
New York Seeks Temporary Restraining Order Against Lyft
In the Uber v. Lyft competition, it seems like Lyft has experienced a serious setback in New York when it tried to launch its services in the Big Apple last week. New York Attorney General Eric Schneiderman and Benjamin Lawsky, Superintendent of Financial Services, filed for a temporary restraining order (“TRO”) to stop Lyft from launching its ride-sharing service.
Uber Valued at $18.2 Billion
Uber, the taxi-like app, was recently valued at $18.2 billion. The company, only four years old, is worth more than Tiffany, Whole Foods, and Hertz Global Holdings and is almost equal in value to Twitter and LinkedIn, for example. Many were shocked by the high valuation, calling it “nuts,” “insane,” “absurd,” and an “idiocy.” Some, on the other hand, believe even the $18.2 billion figure undervalues Uber. Note that Uber’s previous valuation at $3.5 billion in 2013 was called “breathtaking.” The company has come a long way in the year since then, with an even more breathtaking valuation this time.
Valuing Tech Acquisition Deals: Signal of a New Trend or a Recurring Tech Bubble?
Tech start-ups are proliferating around the world. They introduce technology to every aspect of our lives, from the way we communicate, to the way we care about our health, to the way we store our data. As a result, almost one third of the recent NYSE and NASDAQ IPO filings involved a tech-related corporation. However, when it comes to evaluating their potential, there is plenty of extravagancy involved, and some may say, accidentally turns young start-up founders into millionaires.
Car-Ride Apps Become Transportation Network Companies
Before receiving cease and desist letters in November 2012, companies providing smartphone apps connecting users in need of rides to willing drivers had operated in their own unregulated market. That has changed now that the California Public Utilities Commission (“CPUC”) voted on September 19th to accept a proposal to regulate the nascent industry.The CPUC asserted its jurisdiction over Transportation Network Companies (“TNCs”) as a subset of chartered passenger services already under their regulatory control.
The Section 409A Valuation: Do You Really Need One?
[Editor’s Note: The following post is authored by Foley & Lardner LLP]
Yes. You do. That was easy. But perhaps we have gotten ahead of ourselves and we should start at the beginning of the story. While Section 409A is a tax provision, its genesis was the perceived abuse of deferred compensation arrangements by rapacious executives in the Enron and WorldCom debacles. Like the “golden parachute” rules of Section 280G, Section 409A is intended to work some good old-fashioned social engineering magic through the tax code. It was quite handy that these rules also made the IRS happy as Section 409A works in part by reigning in the ability of employees to “manipulate” or select the year in which they would have to recognize taxable income from various types of deferred compensation schemes. You see, the IRS does not like taxpayers to have any flexibility when it comes to the timing of recognition of income. Section 409A succeeded in achieving some of its narrow objectives but as is often the case, in ways that likely went well beyond the specific concerns that the statute was originally intended to address. The treatment of stock options under Section 409A is one of those unfortunate extensions. Regardless, we now have to live with these rules.
FTO Analysis Necessary for Crowdfunding
Financing through crowdfunding is an attractive way for startups and small businesses to raise capital by receiving small amounts from a large number of investors. The method will only increase in popularity after the SEC finalizes the provisions for equity-based crowdfunding. There are, however, potential IP problems inherent in crowdfunding. In order to attract investors, companies have to publicly disclose detailed information about their business. Competitors can then use this information to find IP violations and sue the budding business. In order to prevent or prepare for this situation, companies using crowdfunding should conduct a thorough freedom to operate (FTO) analysis. (more…)
Professor Robert Bartlett speaks on the JOBS Act at Orrick, Herrington & Sutcliffe LLP.
Within a month of the Initial Public Offering (“IPO”) Task Force’s white paper, “Rebuilding the IPO On-Ramp,” Congress developed the Jumpstart Our Business Startups (“JOBS”) Act. The legislation aims to create new companies, and ultimately new jobs. The JOBS Act loosens security regulations, making it easier for startups to access funding and go public. Professor Robert Bartlett recently spoke about the effects of the JOBS Act at a Berkeley Law Alumni Center event held at Orrick, Herrington & Sutcliffe LLP.