Author Archives: joewallin@outlook.com

If you are investing in early stage companies, there are certain deal terms you want. Most you probably know already: if it’s a round of convertible notes, you want a discount and a cap; if it’s a priced round, you want a liquidation preference. Etc. But there is a new thing you need to addContinue reading “Secondary Sales and An Investor Covenant You Don’t Want To Miss”

What is Revenue Based Financing? For the most part, early stage company financings fall into two categories: 1.​Fixed price financings (e.g., a Series Seed or a Series A Preferred Stock financing); and 2.​Non-fixed price financings (e.g., convertible notes, or convertible equity). Fixed price rounds are great when you can fix the valuation of a company,Continue reading “The Beauty of Revenue Based Financing”

The 90-day post termination of employment exercise period for stock options is under attack. A lot of companies are moving away from 90 days. You can find a list of them in a GitHub repo maintained by Zach Holman. Zach also has written an impassioned post about this issue. Why is the 90-day rule problematic? BecauseContinue reading “Incentive Stock Options: Post-Termination of Service Exercise Periods”

The staff of the SEC has issued its report on the definition of “accredited investor.” It could be what we are looking at is the following: a “super accredited investor” definition (credit to Bill Carleton for coining this term), and the current definition–but if you don’t qualify as a “super accredited investor” you will beContinue reading “Accredited Investor: Two Tier System Coming?”

If you are looking for the complete text of new Section 4(a)(7) of the Securities Act of 1933, as amended, I have quoted it in full below. You can also find the entire text of the Fixing America’s Surface Transportation Act or the “FAST Act” at this link. This new law makes it substantially easierContinue reading “The Text of New Section 4(a)(7)”

You may not be aware, but the federal securities laws contain two definitions of the term accredited investor. One definition is helpful to startups, and the other is not. The definition of accredited investor that is helpful to startups is found in Regulation D. Rule 506 of Regulation D is the securities law exemption usedContinue reading “The Two Definitions of Accredited Investor”

If you have run a successful crowdfunding campaign, you know what happens next. You owe a lot of crowdfunding sales tax. And you might not have appreciated what you were getting yourself into on the crowdfunding sales tax front. Crowdfunding Sales Tax Troubles There is a bill that has been introduced in the Washington StateContinue reading “Crowdfunding Sales Tax Troubles”

The idea that you can “test in” to accredited investor status is gaining momentum. Rep. Schweikert (R-Ariz.) has introduced a bill that would do just that. His bill has passed out of the House Financial Services Committee and is apparently headed to the floor of the House. You can track the progress of the billContinue reading “Accredited Investor: Let’s Let People Test In”

If you are in the process of awarding stock options to employees or service providers, do not forget that you need (among other things) board approval of all stock option grants. This is required by the corporate law of Delaware, Washington, and I imagine almost every state corporate law in the country. (In this post, IContinue reading “Stock Options: Don’t Forget Board Approval”