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SEC Provides Interpretations on Rule 506(c)

As we’ve previously blogged, in July 2013 the SEC adopted rules that permit general solicitation and general advertising in connection with certain offerings of securities to accredited investors.  Yesterday, to help the markets understand some common interpretative questions associated with these new rules, the SEC issued several new Compliance and Disclosure Interpretations. …

Tax planning for year-end; expiration of the 100% tax exemption for gain on QSBS

Just a reminder that the temporary 100% exclusion for Federal capital gains tax on the sale of “qualified small business stock” (“QSBS”), under Section 1202 of the IRS regulations, is set to expire at the end of calendar year 2013.

The QSBS tax exemption was originally enacted to incentivize investment in certain small businesses by providing (non-corporate) investors the opportunity to exclude all or a portion of their gains from Federal capital gains tax in certain circumstances.…

Overview of Proposed SEC Crowdfunding Rules

CONTRIBUTED BY Trent Dykes and Nathan Luce

Earlier today, the Securities and Exchange Commission (SEC) took an important step in making securities-based crowdfunding a reality for many small companies with the release of its proposed rules governing crowdfunding. The proposed rules, called “Regulation Crowdfunding,” were drafted in connection with Title III of the JOBS Act.…

Demo Days, Pitch Events and the New Reg D

CONTRIBUTED BY
Trent Dykes, Megan Muir and Kiran Lingam (guest contributor from SeedInvest)

I. Introduction / Background

With the passage of the JOBS Act, the regulation governing most private securities offerings is undergoing a dramatic makeover. Congress tasked the Securities and Exchange Commission (SEC) with developing new rules allowing companies to generally solicit funds, subject to restrictions as determined by the SEC.…

Recent Venture Capital Trends: CB Insights Q2 2013 Data

CB Insights has published summary data regarding recent venture capital trends, together with a full report available to paid subscribers.  In terms of investments by VCs, the report indicates that US$7.0B was invested in 807 deals in the second quarter of 2013, representing a small increase in dollars invested (versus US$6.9B in first quarter) but a decrease in the number of deals of approximately 4%. …

SEC Issues Rules Lifting Ban on General Solicitation in Unregistered Fundraising

Ban on General Solicitation Lifted with Respect to Accredited Investors

Today, the Securities and Exchange Commission (SEC) adopted new rules to lift the ban on general solicitation of funds or general advertising for certain private offerings of securities.  Once the rules become effective (60 days after publication in the Federal Register), provided that certain requirements are met, startups, fund managers and other companies will be able to utilize general advertising to offer to sell stock to “accredited investors” as defined in Rule 501 of Regulation D of the Securities Act of 1933 (typically wealthy individuals with liquid net worth in excess of $1 million or investment funds; see our discussion of the recently revised accredited investor standards here as well as information on the SEC’s site http://www.sec.gov/answers/accred.htm). …

“Venture Capital Fund” Flowchart for Exemption Under the Investment Advisers Act of 1940

This article is appearing simultaneously on The Venture Alley and on Startup Law Blog

The below flowchart may be helpful to you in answering the question whether you qualify for the exemption for “venture capital funds” under Section 203(l) of the Investment Adviser’s Act of 1940 ( the “Advisers Act”), pursuant to the final rules promulgated by the SEC.…

Comment Letter Response to Washington State’s Plans to Regulate More Fund Managers

As readers of this blog know, Washington State is proposing new rules that will require more fund managers to become registered investment advisers.  These rules were originally proposed in the second half of last year and, in response to preliminary comments, the Securities Division of the Washington State Department of Financial Institutions (DFI) proposed new rules for comment by May 21, 2013. …

2013 Private Equity Survey Indicates Cautious Optimism

The 2013 Private Equity Survey of McGladrey, done by the research unit of SourceMedia, indicates growth and optimism in the PE sector although the funds remain cautious about the broader economy.

Some findings of the 2013 survey:

  • Funds see “management capabilities and effective strategy and execution as primary drivers of successful portfolios.”
  • Outdated IT systems, under-qualified IT personnel and inadequate infrastructure become apparent following acquisitions, often impacting critical areas of the business.

Angel investment trends; 2012 year in review

pic-trent.jpgCONTRIBUTED BY
Trent Dykes
trent.dykes@dlapiper.com

The Angel Resource Institute, Silicon Valley Bank and CB Insights recently released their angel group update 2012 year in review, the Halo Report. The Halo Report analyzes angel investment activity and trends in the United States. Here are a couple interesting 2012 highlights:

  • The median angel round size was $600K;
  • The median angel round size was $1.5M when angel groups co-invest with other types of investors;
  • The median pre-money valuation for early stage angel group deals was $2.5M;
  • 63% of angel group deals were in companies with revenue;
  • 56% of angel group deals were in new companies;
  • 11% of 2012 deals were convertible debt (up from 6% in 2011);
  • California was the most active region for angel deals, both in number of deals (18.1%) and total dollars invested (23.1%), but California was lower in both categories compared to 2011; and
  • The top three industry sectors attracting angel investment were internet, healthcare and mobile, both in number of deals and total dollars invested.

Facilitating startup growth: Overview of Israel’s OSC funding

If you are reading this post, then you probably share my belief that one of the best things our government can do to spur economic and job growth is to support the startup community. In recent years, government entities ranging from state (See Maryland’s proposed tax credit to support investment in cybersecurity industry) to federal (See JOBS Act: What matters most for startups and VCs) to the IRS (See Fiscal Cliff Bill to renew 100% QSBS tax break) have enacted programs designed to enable more and easier investments into startup companies (in the US).…

Proposes tax credit to support investment in cybersecurity industry

Article prepared by and republished courtesy of Drew M. Young and Joseph H. Langhirt of DLA Piper; originally published here http://www.dlapiper.com/maryland-proposes-tax-credit-to-support-investment-in-cybersecurity-industry/.

Maryland Governor Martin O’Malley’s recently released proposed Fiscal Year 2014 budget provides funding to support private investment in the cybersecurity industry.…

2012 US equity and debt capital markets activity in review

pic-trent.jpgCONTRIBUTED BY
Trent Dykes
trent.dykes@dlapiper.com

Compliments of our colleague Christopher Paci, the Chair of DLA Piper’s US capital markets practice, below is a review of 2012 US equity and debt capital markets activity.

Equity.  US equity and equity-related proceeds totaled $244.5B from 795 deals, a 32.7% increase compared to 2011. IPOs accounted for $40.9B, or 16% of the total, in 2012, up 18% from 2011 (excluding Facebook, down 27%).…

The final FATCA Regulations: Highlights

Article prepared by and republished courtesy of Alan Granwell and Witold Jurewicz of DLA Piper; originally published here http://www.dlapiper.com/the-final-fatca-regulation-highlights/.

The US Treasury Department has issued the final FATCA regulations.

Although simplified and clarified, the Regulations are lengthy (544 pages) and more than 150 pages longer than the Proposed Regulations.…

Equity and Bond Market Outlook 2013

A friend of mine at a major investment bank sent me their market outlook for 2013.  In 2012, the world markets were up 16%.  For 2013, they are projecting:

  1. Interest rates are likely to remain low for a few years,
  2. investors should lower their return expectations, and
  3. “policy” will remain incremental in key developed and emerging markets economies.

Trusts as Accredited Investors

Perkins, Rachel_Headshot.jpgCONTRIBUTED BY

Rachel M. Perkins
rachel.perkins@dlapiper.com

We often receive questions about the application of the “accredited investor” definition (copied at the end of this post) in Rule 501(a) of Regulation D, and one that’s come up from time to time is how trusts generally qualify as “accredited investors.”  Whether a trust is an “accredited investor” is a fact-specific determination, but generally speaking, the SEC has provided some guidance on trusts in the form of no-action letters and the Compliance and Disclosure Interpretations (“C&DI”).…

Angel investment trends for Q3 2012

Today the Angel Resource Institute, Silicon Valley Bank and CB Insights released their angel group update for Q3 2012, the Halo Report. The Halo Report analyzes angel investment activity and trends in the United States. Here are a couple interesting highlights:

  • The median angel round size was $640K;
  • The median angel round size was $1.59M when angel groups co-invest with other types of investors;
  • The median pre-money valuation for early stage angel group deals was $2.6M;
  • California was the most active region for angel deals, both in number of deals (21.4%) and total dollars invested (28.0%); and
  • The top three industry sectors attracting angel investment were internet, healthcare and mobile, both in number of deals and total dollars invested.

Tax Changes – Implications for Venture Capital

Asher Headshot - Resized.pngCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The National Venture Capital Association (NVCA) had a good post about the implications of the new tax bill significant to the venture capital community.  Significantly, they note that this bill did not address any changes to the tax rate for “carried interest”, but they do “fully expect” carried interest tax rate increases to remain a topic of discussion as part of the larger pending tax reform discussion, although they project that discussion to be delayed until the second half of 2013.…

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