VC and Private Equity

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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.1  In all cases you should consult with an attorney.  For more detailed information regarding the federal exemption, check here.  Note that the Washington State Department of Financial Institutions (DFI) has proposed rules that are going to require many fund managers to register with the State as investment advisors.  We plan to prepare a separate flowchart to help you understand those rules once they are finalized.Continue Reading “Venture Capital Fund” Flowchart for Exemption Under the Investment Advisers Act of 1940

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.  Quoting from the DFI’s Notice to Interested Parties dated March 27, 2013:

In August 2012, the Securities Division circulated an early draft of rule amendments to the interested parties list. We also conducted a small business economic impact survey. In response to comments received from interested persons, and in response to the results of the small business economic impact survey, the Securities Division made certain changes to the proposed rules compared to the earlier draft…

The Securities Law Committee of the Business Law Section of the Washington State Bar Association, representing attorneys practicing in this area throughout Washington State, submitted formal comments to the DFI’s request.  Their comment letter is included below.  Full disclosure, I’m not a member of the Committee, but they asked me to help them in drafting their formal response with respect to how the rules relate to private fund advisers.Continue Reading Comment Letter Response to Washington State’s Plans to Regulate More Fund Managers

This article is appearing simultaneously on The Venture Alley and on Startup Law Blog. Readers may feel free to re-post this content elsewhere as well.

The world is changing for venture funds and similar funds in Washington State, and not necessarily for the better.  It used to be the case that managers of venture or other private funds did not need to file anything with the SEC or state securities regulators (other than Forms D incident to their fundraisings).  Dodd-Frank changed all that – but provided that investment advisers solely to venture capital or other small private funds may be exempt (based on Congress’ belief that these funds posed no systemic risk to the nationwide financial system).

There are now SEC regulations that define the new exemptions for the managers of venture funds (discussed in more detail here) and for the managers of private funds with less than $150M management (discussed in more detail here).  Even if exempt, however, managers of venture funds and private funds with AUM of less than $150M now must publicly report certain high-level information, which becomes publicly available.  For example, here is the exempt reporting adviser Form ADV for Union Square Ventures.

These rules settled out a few years ago.  Right now, the bigger issue is with state regulators.  State regulatory regimes need to be updated in order to conform to Dodd-Frank.  The North American Securities Administrators Association (NASAA) created model rules for state regulators to follow, which adopted the same venture capital and private fund exemptions.  Many states, including California, have now adopted the NASAA model rules.Continue Reading Washington State to Regulate Fund Managers

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.
  • Active integration leadership and experienced team members are important to success.
  • Firms frequently find weaknesses in

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Continue Reading 2013 Private Equity Survey Indicates Cautious Optimism

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

…
Continue Reading Angel investment trends; 2012 year in review

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). However, many commentators have argued that such efforts are not enough.

One country that appears dedicated to its startup community, and that has a very interesting and seemingly effective model for facilitating growth, is Israel. Last week I met with Daniel Marcus of the Israeli law firm Amit, Pollak, Matalon & Co. to discuss emerging growth and venture capital markets and I took the opportunity to ask Daniel more about Israel’s government funding model via its Office of the Chief Scientist (OCS). Luckily, Daniel and his colleague, May-ad Katz, had previously written a great article titled “Exporting technology from the ‘start-up’ nation” summarizing the OCS funding system and related encumbrances.Continue Reading Facilitating startup growth: Overview of Israel’s OSC funding

Thumbnail image for Ted Kummert.jpgMegan Muir.jpgCONTRIBUTED BY
Megan Muir
@megan_muir

Q&A: Why this former Microsoft exec wanted to become a venture capitalist  Ted Kummert announced on February 5th that he would be leaving his longtime position as a Microsoft executive to take a new role at venture capital firm, Madrona Venture Group. In this Q&A with John Cook of Geekwire, he answers questions about his experience and what caused him to take the leap into VC. “I…look forward to spending time, more broadly, across the Madrona portfolio of companies. I don’t tend to…
Continue Reading From MSFT to VC: Ted Kummert