October 2010

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

**UPDATE** The QSBS stock exclusion discussed below has been extended through December 31, 2011.  Read more here.

Last month, Congress passed a temporary 100% tax exclusion for gains on Qualified Small Business Stock (“QSBS”) for capital gains and alternative minimum tax (“AMT”) purposes.  Although it is now a month old, we’re still getting a lot of questions about it so I think a blog post is in order.

WHO:  Investors in startup C corporations.

WHAT:  100% tax exclusion on gains from QSBS.

HOW:  Acquire QSBS after September 27, 2010 and before January 1, 2011 and hold the stock for at least 5 years.Continue Reading Qualified Small Business Stock – Tax Alert

The day has finally arrived that many (if not most) life sciences startups and venture-backed companies have been waiting for – the deadline for the IRS decision regarding which companies will be awarded a Qualified Therapeutic Discovery Project (”QTDP”) tax credit or grant (and how much they will receive).
Continue Reading QTDP tax credits and grants: And the winners are… [updated]

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

NEW INFORMATION ON THIS TOPIC HAS BEEN ADDED HERE.

Many of my fund clients are anxiously awaiting an update regarding whether they are going to become subject to regulation under the U.S. Investment Advisor’s Act of 1940 (the “Advisor’s Act”) as a result of the Dodd-Frank regime passed this summer. I just spoke on Thursday at the 7th Annual Private Equity Conference about federal law changes in the past year. They key takaway from the conference regarding Advisor’s Act registration? Stay Tuned. Much of the uncertainty should be clarified in the next two months, and finalized by Summer 2011…just in time, since firms within the scope of the new Advisor’s Act rules will be required to comply with its registration requirements as of July 21, 2011.

Historically, most venture capital and private equity funds have been able to qualify for an exemption from the Advisor’s Act. With the comprehensive Dodd-Frank legislation passed this year, those exemptions have been narrowed substantially. Now, many local fund managers are hoping that they will qualify as managers of “venture capital funds” so that they are excluded from registration.Continue Reading Advisor’s Act Update: What is a Venture Capital Fund?

There are a lot of very interesting events happening in the venture capital landscape of late. In addition to the phenomenon of venture capital funds making small angel-like seed investments, venture capital firms are teaming up with corporate partners to create industry-specific investment funds. Just today, Kleiner Perkins Caufield & Byers announced that it has created “sFund,” a $250 million fund to back social applications, in collaboration with Facebook, Amazon, Zynga and others. According to Mashable, sFund made its first investment of $5 million into CafeBots, a friend relationship management
Continue Reading The next generation of venture capital?

Megan Muir.jpgCONTRIBUTED BY
Megan Muir

Although the dollar amounts may be relatively small, there is increasing competition for early stage startup investments that is driving up valuations.  Paul Graham talked about this phenomenon at Y Combinator’s annual Startup School (see here for Graham’s presentation).  VCs are making some small seed investments in dollar amounts you’d typically see from angels, creating pressure on other investors to get in a deal quickly and allowing founders to push valuations higher.  Dow Jones VentureWire reporter Tomio Geron has a good summary here.

The speed
Continue Reading Venture capitalists playing in the land of angels