Startups

JOBS Act Symposium: Liveblog Recap & Review

By Valerie Jon Ramos, J.D. Candidate 2015 | Posted on

This post will detail the two panels from last Friday’s 2013 BCLBE and BBLJ JOBS Act Symposium:  1)  The IPO On-Ramp and 2) Crowdfunding.

Panel 1:        The IPO On-Ramp

Moderator:  Ian Peck

Robert Bartlett, Professor, UC Berkeley, School of Law

Reza Dibadj, Visiting Professor, UC Berkeley, School of Law

Martin Zwilling, Startup Professionals 

Background: Title I of the JOBS Act

Title I of the JOBS Act was originally pitched as a job creation vehicle.  Title I seeks to accomplishes this through its two provisions: (1) providing an “on-ramp” to going public for emerging growth companies (“EGCs”), a company within five years of going public, using existing principles of scaled down regulation; and (2) improving the availability and flow of information for investors before and after an IPO.

There are four­ major changes that were discussed during the panel:

1)    Creation of the “Emerging Growth Company” as a new category of issuer

2)    EGCs eligible for IPO On-Ramp enjoy significant benefits, including:

  • A reduced two-year requirement of audited financials needed in registration statements versus the standard three to five years
  • Allows communication between EGCs and qualified institutional buyers prior to filing registration statement (although there is an SEC Rule that does not allow solicitation of filing)
  • Research reports can be filed even while the EGC is making an offer

3)    EGCs have less extensive financial reporting/audit obligations (exempt from SOX)

4)    EGCs have limited executive compensation disclosures 

Moderated Q&A

When questioned about what problems exist in the IPO market and how the JOBS Act approached these problems, there was a general consensus that the worry stemmed from the dramatic decline in IPOs in the market over the past decade. IPOs going overseas, problems that came with the economic downturn, and the choice of M&A as the preferred exit strategy.  Zwilling spoke beyond the general market on how entrepreneurs, in general, want control of their company, and when they are ready to exit, M&A serves as a better exit strategy due to its lower costs and fewer regulations.

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JOBS Act Symposium: Crowdfunding

By Christopher Hammond, J.D. Candidate 2015 | Posted on

The Symposium’s second panel discussed the JOB Act’s crowdfunding exception.  Our morning panelists are joined by Mary Dent, Jerome Engel, and Eric Brooks.  [Note:  Mr. Brooks is with the S.E.C., but noted that his remarks are not official and do not represent the administration’s position.  His comments are his own.]

What is crowdfunding (“CF”) is trying to achieve?

Professor Dibadj began, noting that the CF movement is largely motivated by technology and the concept that individuals can pool money towards a common cause.  The idea had worked in other sectors (e.g. natural disaster relief or political campaigns), so some wanted to apply CF in the private sector.  The problem, pre-JOBS Act, was that capital transfers could be considered an unregistered investment or security, thus easily violating federal securities laws.  Martin Zwilling agreed that investors saw CF structures work in the non-profit space, so they asked, “Why couldn’t it work for for-profit companies?”

Mary Dent added that the CF movement was spurred by the perception (whether or not it is true) that small companies have recently been the biggest contributor to job growth.  However, many startups could not access funding from skeptical VCs or banks.  Congress wanted to encourage these small, growing companies so created the JOBS Act’s CF exemption to allow alternative funding networks.

Martin Zwilling cautioned that investors might be funding weak or under-developed companies.  VCs might argue that the market has not suffered from a lack of available funds, but a shortage of good investment opportunities.  Zwilling concluded, “I don’t think CF will solve [those companies’] problems if they’re not ready for the market yet.”

Professor Bartlett viewed the rise of CF as “the democratization of finance.”  Many CF platforms and groups press their case by framing it as a fairness issue, whereby small, less-sophisticated investors can participate in startup financing opportunities.  However, Mr. Brooks drew upon his experience as a securities regulator, noting that this very democratization creates serious concerns of fraud.

Liveblogging from the 2013 BCLBE and BBLJ Symposium

By Christopher Hammond, J.D. Candidate 2015 | Posted on

The Berkeley Business Law Journal will be covering today’s symposium, The JOBS Act: Initiatives and Challenges of the New Legislation, hosted with the Berkeley Center for Law, Business and the Economy.

The event is taking place at Boalt Hall from 8:45a – 2:00p and will include two panel sessions:  First up, “The IPO On-Ramp” featuring discussion and insight from Robert Bartlett, Reza Dibadj, and Martin Zwilling.  Our second panel, beginning at 11:00a, will critique the “Crowdfunding exception” for IPOs.  Earlier panelists will be joined by Eric Brooks and Mary Dent.

Visit The Network often to follow the event.  Our writers will be frequently posting throughout the morning.

BCLBE and BBLJ 2013 Symposium — The JOBS ACT: Initiatives and Challenges of the New Legislation

By Will Schildknecht, J.D. Candidate 2015 | Posted on

A new frontier in securities law, but how will people use it?

The Jumpstart Our Business Startups Act (JOBS Act) offers new avenues for investors and small companies to participate in the market.  Leaders in business and law will be gathering at the University of California, Berkeley, School of Law on March 15, 2013, to discuss the Act’s opportunities and risks.  The Berkeley Business Law Journal and Berkeley Center for Law, Business, and the Economy are proud to present their 2013 symposium—The JOBS Act: Initiatives and Challenges of the New Legislation from 8:45a – 2:00p at Boalt Hall.  Registration is required.  The symposium will bring together prominent speakers from the fields of law, securities regulation, and venture capitalism to discuss two critical areas of the Act.

The first panel session will explore “The IPO ON-Ramp.”  In response to the decrease in companies applying for initial public offerings, the JOBS Act incentivizes companies to make an offering and introduces a gradual five-year plan to scale up to full public status.  Panelists including Robert Bartlett and Reza Dibadj from UC Berkeley, School of Law, as well as Martin Zwilling from Startup Professionals, will discuss the reason for the decline in IPOs and whether the steps taken in the JOBS Act will arrest and reverse this decline.  The IPO ON-Ramp panel runs from 9:00 – 10:45a.  Further readings about the IPO panel discussion are available on the BCLBE website.

The second panel will discuss the widely-publicized “Crowdfunding” public offering exception.  The panelists will demystify the types of small money investments that are permitted under the crowdfunding exception.  Having discussed the newly permitted activities, the panel will engage in a cost-benefit discussion of the opportunity for new investment avenues weighed against the potential for fraud inherent in this up-tempo investment frontier.  Panelists from the first session will be joined by Eric Brooks from the SEC and Mary Dent from Silicon Valley Bank.  The “Crowdfunding” panel will present their thoughts from 11:00a – 12:45p.  More information on the Crowdfunding panel discussion is available on BCLBE’s website.

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Firm Advice: Your Weekly Update

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

The DOJ recently entered into its first deferred prosecution agreement with a financial institution related to the LIBOR-fixing conspiracy.  We’ve written about the LIBOR scandal here and here.  While deferred prosecution agreements are common in white collar criminal prosecutions, this was a first for the DOJ in an antitrust prosecution.  Instead, the DOJ historically has used its leniency program as its primary investigative tool.  In a recent Client Alert, Cadwalader, Wickersham & Taft explains the DOJ’s recent shift and its implications for financial antitrust enforcement.

Many large corporations are sitting on stockpiles of cash.  Options for these companies include investing the money, returning it to investors through dividends, or a stock buyback program. Holding on to the stockpile can pose serious headaches for corporations.  In a recent Corporate Finance Alert, Skadden explains the strategic considerations for different types of share-repurchasing programs, including their advantages and legal implications.  The Alert also presents an FAQ-style, how-to guide for implementing the various options.

Wilson Sonsini recently published its “Entrepreneurs Report: Private Company Financing Trends.”  From the Report:  “[T]he percentage of up rounds increased during Q4 2012 from the prior quarter.  Also, while median pre-money valuations in Q4 declined somewhat from earlier in the year, they still remained higher than those in 2011 and 2010.  Finally, preferred stock terms continued to be more company-favorable in 2012 than in prior years.  For example, the percentage of deals with senior liquidation preferences was lower in 2012 than in 2011 and 2010, and the percentage of deals with non-participating preferred stock was higher in 2012 than in the two prior years.  In sum, although total venture dollars raised in 2012 decreased from the previous year, the venture funding environment continues to be strong for entrepreneurs and early-stage companies.” 

BCLBE Russian Market Conference: Cross-Border Investment

By Amanda Berloni, L.L.M. Candidate 2013 | Posted on

Earlier this month, the Berkeley Center for Law, Business and the Economy hosted its latest conference on the “Russian Market: Legal and Business Perspectives.”  The Network extensively covered the series of speakers and panel talks, with special attention to its IP and innovation topics.  This post considers international investment in the Russian market.

Panelists Michael Sanders and Ramsey Hanna discussed the Russian investment climate and the challenges of completing cross-border transactions.  Specifically, Sanders and Ramsey analyzed the joint venture between RUSANO and Domain Associates to highlight the business culture challenges of completing cross-border investment transactions with Russian firms.  In March 2012, RUSANO, a Russian open joint stock company, and Domain Associates (“Domain”), a U.S. venture capital firm, entered into an investment agreement.  Pursuant to the agreement, the parties agreed to jointly invest in emerging life sciences technology companies, foster transfer of technology into Russia, and establish pharmaceutical manufacturing facilities in the country.  Sanders and Ramsey noted the importance of building trust and confidence between RUSANO and Domain.  That is, successfully negotiating the joint venture’s terms required developing good working relationships between the parties’ legal teams and those individuals charged with structuring their partnership.

Conducting business with firms from different markets is not without its challenges.  Russian firms employ different negotiation tactics and the negotiation process can be lengthy and detailed.  As the director of a US pharmaceutical firm wrote, “Russia is a great place to operate – you can really build a strong, profitable business here – but there are no shortcuts.”  In negotiating the RUSANO-Domain joint venture, the parties dealt with the counter-effects of corruption.  To be sure, there is tendency among Russian firms to focus on procedure and formalities.  In the face of corruption and bribery, honest Russian firms strive for transparency and can be “methodical to a fault.”  The “rigid business culture” in Russia can be contrasted with the more “nimble start-up culture” present among Silicon Valley firms.

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Lessons from the Symposium, “Russian Market: Legal and Business Perspectives”

By Nadezhda Nikonova, J.D. Candidate 2013 | Posted on

On February 5, 2013, the Berkeley Center for Law, Business and the Economy (BCLBE) and LegalConnect RU held the Russian Market: Legal and Business Perspectives symposium. Several of the panelists also presented at Berkeley Law the following day. The various panels discussed the benefits and obstacles of doing business in Russia, Russia’s accession into the WTO, Russia’s changing Intellectual Property regime, and innovation in Russia (private and government-backed). Common themes included the effects of corruption on Russian law and business, the need to partner with a Russian attorney for all cross-border transactions and litigation, and the differences between Russian-style and American-style law and business culture.

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