CB Insights recently released its Pacific Northwest Investment and Exit Report, which analyzed private company investment and exit activity over the past five years. The report collected data from all activity sources, including venture capital, private equity, strategic corporate investments, corporate venture investors, angels, incubators and accelerators. Here are a few highlights from the report:

  • Since 2009, the number of deals closed per year has increased 144% (195 deals in 2009 vs. 475 deals in 2013), with the total annual investment amount increasing 81% ($780 million dollars invested in


Continue Reading Pacific Northwest Investment and Exit Report

Earlier this month the Cayman Islands passed new legislation revising its existing Exempted Limited Partnership Law.  The new legislation, the Exempted Limited Partnership Law 2014, replaces the existing legislation in its entirety and has a primary objective of providing Cayman Islands partnerships with more flexibility in a number of areas and generally bringing Cayman Islands law into closer conformity with existing laws in more familiar jursidictions such as Delaware.  This is welcome news to both private fund investors and sponsors.  A detailed review of the changes enacted by the new legislation will follow in a future post on The Venture Alley, but here is a quick summary of some of the more material changes contained in the new legislation:

  • Allows foreign limited partnerships to serve as general partners of Cayman Islands exempted limited partnerships (previously funds typically had to set up either a Cayman Islands exempted limited partnership or Cayman Islands exempted company to serve as the general partner);
  • No longer requires an exempted limited partnership’s register of limited partners to reflect contributions by and distributions to limited partners, but rather only the names and addresses of limited partners (which will serve to increase the privacy of limited partners who are invested in Cayman Island investment funds);
  • No longer requires the limited partnership agreement to be executed as a deed and witnessed in order to make valid a power of attorney granted therein (with this change being retroactive so as to validate any power of attorney granted prior to the passage of the new legislation); and
  • Simplifies the admission process for new limited partners in connection with a transfer of interest in an exempted limited partnership.
    Continue Reading Cayman Islands Revise Exempted Limited Partnership Law and Pass New Legislation Allowing Enforcement of Contracts by Third Party Beneficiaries

Bill Carleton has a good post regarding the recent comments from Keith Higgins, the Director of the Division of Corporation Finance, who spoke at the 2014 Angel Capital Association Summit.  Higgins discussed the SEC’s principles-based approach with respect to meeting the requirements of new Rule 506(c). 

Since the SEC’s adoption of new Rule 506(c) in September 2013 allowing general solicitation by issuing companies in certain circumstances, angel investors have been concerned about the accredited investor verification standards set forth in those new rules.  The debate has centered around what actions
Continue Reading Accredited Investor Verification under Rule 506(c)

Today the Angel Resource Institute, Silicon Valley Bank and CB Insights released their angel group 2013 year in review, the Halo Report. The Halo Report analyzes angel investment activity and trends in the United States. Here are a couple interesting 2013 highlights:

  • The median angel round size remained steady over the last three years at $600K;
  • The median angel round size for 2013 was $1.7M when angel groups co-invest with other types of investors, which was an increase over the median 2012 round size of $1.5M;
  • The


Continue Reading Angel investment trends; 2013 year in review

According to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), venture capitalists invested $29.4 billion in 3,995 deals in 2013, an increase of 7% in dollars and a 4% increase in deal volume over 2012 levels.  The full Q4 and FY 2013 investing trends are available here.

A couple of interesting highlights for 2013:

  • Internet-specific companies captured $7.1 billion, marking the highest level of Internet investment since 2001.
  • Investments into the software industry also reached their highest level since 2000 with $11.0 billion flowing


Continue Reading 2013 annual venture investment dollars rise 7%

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.  The new interpretations mainly address:

  • when and how companies may switch between “old” Rule 506(b) (no general solicitation) and new 506(c) (general solicitation permitted),
  • the need to amend Form D if such changes are made,
  • the


Continue Reading SEC Provides Interpretations on Rule 506(c)

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. Whereas traditional crowdfunding involves a company offering things like advanced product or information releases, premium services or the ability to contribute to a given cause in exchange for an investment, Regulation Crowdfunding would allow those same companies to issue actual securities (i.e., debt or equity) in exchange for investments—a dramatic shift from what has become fairly common practice on websites such as Kickstarter or Microryza over the past few years.

The SEC’s Regulation Crowdfunding proposal would implement rules governing the offer and sale of securities under new Section 4(a)(6) of the Securities Act of 1933 (Section 4(a)(6)). The proposal also provides a framework for the regulation of registered funding portals and brokers, whom issuers must use as intermediaries in their crowdfunding efforts pursuant to Section 4(a)(6). In addition, the proposal would exempt securities sold pursuant to Section 4(a)(6) from the registration requirements of Section 12(g) of the Securities Exchange Act of 1934.
Continue Reading Overview of Proposed SEC Crowdfunding Rules

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. In July 2013, the SEC issued final rules on this topic and also proposed additional rules that are not yet final. Managers of incubators, accelerators, angel groups and others involved in startup capital raising have expressed great concern about how the revised regulations will affect them, particularly with respect to their public-facing events.

Whether presenting at a demo day event, angel group meetings or business plan competitions constitutes “general solicitation” is a question that has caused great concern among many angel groups, incubators and other event organizers around the country. This post is designed to provide practical tips to event organizers on how to structure their demo day, pitch event or angel group meeting event in light of new federal rules and the current regulatory landscape.

Starting today, September 23, 2013, the final rules published by the SEC in July go into effect and companies can use general solicitation (or advertising) in connection their securities offerings under the new Rule 506(c) of Regulation D of the Securities Act of 1933, adopted under Title II of the JOBS Act. However, the companies that choose to take advantage of general solicitation under the new rules will have to take steps they did not need to take in the past, including additional verification of accredited investor status. If the proposed rules go into effect, there are a further steps that would be imposed on companies choosing to generally solicit, including making advance filings of a Form D, filing with SEC the materials used in the general solicitation and including specific language (referred to as “legends”) in written solicitation materials.
Continue Reading Demo Days, Pitch Events and the New Reg D

Megan Muir.jpgCONTRIBUTED BY
Megan Muir

Earlier this summer, together with some of my partners within DLA Piper (Christopher Paci, Jason Harmon, Darryl Steinhause and Wesley Nissen), I wrote an article about new SEC regulations concerning private offerings. The final rules issued in July 2013 by the SEC go into effect on September 23, 2013. Below is a summary of the changes with respect to the disqualification of certain “bad actors” in connection with private offerings.  Also, attached is a sample Rule 506 Covered Person Questionnaire seeking information about potentially disqualified individuals and entities. The full article also contains a discussion of new rules allowing general solicitation in certain private fundraising as well as a discussion of certain proposed private offering rule changes that are not yet final. That piece may be found here.

The Dodd-Frank Act, enacted in 2010, required the SEC to adopt rules to prohibit use of the Rule 506 exemptions under Regulation D for securities offerings in which certain “bad actors” are involved, whether or not general solicitation or general advertising are used in the offering. Rule 506 is the exemption from registration requirements used in many private offerings, including most startup financings. To fulfill this Dodd-Frank requirement, the SEC has adopted rules that disqualify an issuer from selling securities in reliance upon the Rule 506 exemption if the issuer, its board members, certain of its officers and its large shareholders, among others covered by the rule, have experienced a “disqualifying event.” This is similar to existing bad actor rules, such as those found in Rule 505 of Regulation D, which relies on the disqualification provisions set forth in Rule 262 of Regulation A.

Disqualifying events include criminal convictions in connection with sales of securities, certain SEC civil and administrative actions and certain other orders from financial service industry regulatory authorities. If the issuer or other covered person is deemed a bad actor under this rule, the Rule 506 exemption will not be available to the issuer.

Continue Reading New SEC Rules Disqualifying “Bad Actors” in Private Fundraising

Megan Muir.jpgCONTRIBUTED BY
Megan Muir

Earlier this summer, together with some of my partners within DLA Piper (Christopher Paci, Jason Harmon, Darryl Steinhause and Wesley Nissen), I wrote an article about new SEC regulations concerning private offerings. The final rules issued in July 2013 by the SEC go into effect on September 23, 2013. Below is a summary of the changes with respect to general solicitation in such rules. The full article contains a discussion of other regulatory issues that should be considered and new “bad actor” rules, as well as a discussion of certain proposed private offering rule changes that are not yet final. That piece may be found here.

On July 10, 2013 the US Securities and Exchange Commission adopted much-anticipated amendments to its regulations on private offerings under Rule 506 of Regulation D of the Securities Act of 1933, as amended, that lift the more than 80-year ban on general solicitation and advertising for certain purchasers, as mandated by Section 201(a) of the Jumpstart Our Business Startups Act (popularly called the JOBS Act).

Beginning September 23, 2013, these changes will permit issuers to use advertising and other forms of mass communication to sell securities solely to “accredited investors” under Rule 506 of Regulation D. However, these amendments also include several new requirements and procedures. You will want to be aware of these changes before you launch a general solicitation campaign.

Continue Reading New SEC General Solicitation Rules Go Into Effect