Category: Tech News

First Time Entrepreneur Workshop – Saturday September 15th!

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Crowley Corporate Legal Strategy and the LA Venture Association (LAVA) are pleased to announce the next First Time Entrepreneur training program. The program is open to entrepreneurs that are starting companies in areas that are likely to draw venture capital investment. The program is not open to service providers.

During the five hour program, you will learn how to:

  • Determine the value of your company
  • Put together a capitalization table
  • Understand how VCs screen potential investments
  • Understand the differences between trademarks, copyrights and patents and when you need them
  • Choose and work with co-founders
  • Network at startup events — the right way

Julie Pantiskas of Pasadena Angels will also be the guest investor speaker.


For more information and to purchase tickets, visit:

Top 10 highlights from the StartEngine – ICO 2.0 Summit

On Friday, November 10th StartEngine hosted a summit focused on regulated ICOs.

Check out the Top 10 Highlights from the event:

  1. Management and company counsel might need to consult with local legal counsel in other countries to ensure compliance with rules and regulations of other countries. The level of compliance requirements might ultimately result in eliminating countries from the token offering. For those countries that do not get eliminated, be sure to include relevant disclosures by country (and state).


  1. There are several possible federal exemptions and securities regulations that can be used, such as 506(c), the Crowdfunding regulation, Regulation A+, and Regulation S. If you’re relying on more than one, be sure you’re complying with the requirements of each, as they may be different. Also, be careful to also comply with state securities exemption requirements, if necessary.


  1. In order to comply with the advertising rules for US and non-US investors, consider having the tokens sold in the US be different from tokens sold to foreign investors.


  1. Company should consider as a risk factor what the implications are if their token cannot handle the large number of users at the end of their token sale.


  1. “Curb your enthusiasm”, meaning what you say today in marketing and advertising can be used against you later.


  1. When determining whether an investor is accredited, go beyond just a questionnaire. Get bank statements or a letter from their accountant to verify income.


  1. The variety of possible exemptions and securities regulations all have different resale restrictions to be considered and complied with during token sales.


  1. Be extra diligent when doing your know your customer (KYC) and anti-money laundering (AML) checks.


  1. Some investors think there is too much emphasis on who the Company’s advisors are during an ICO. Instead, the focus should be on identifying for investors: (1) who is on the management team? (2) what is the opportunity? (3) what is the smart contract code itself and has it been audited? (4) what is the overall marketplace analysis? and (5) what is the company’s expectation for the use of proceeds?


  1. Investors should have engineers and coders on their team to look at the smart contract code during diligence.


If you missed the event or for more information visit:


Dangers of drafting your own documents



In today’s DIY world, there are some things that should be left to the professionals.

We’ve compiled a top ten list of just some of the dangers you can run into when using templates or drafting your own documents. These are all things that we’ve actually seen in agreements.

  1. Using the wrong document. One classic issue is grabbing the first consulting agreement that shows up on the web, without realizing that it’s drafted to be one-sided in favor of the other party. 
  1. A 4-line agreement with no end-date or ability to terminate. Lasts longer than most marriages…
  1. The Frankenstein agreement. The drafter takes clauses from multiple documents and sews them together without realizing that some concepts are being covered two different ways by two different clauses.
  1. Undefined terms. Every other word in the agreement is uppercased, but not defined. 
  1. Fancy words.Malfeasance” and “devolve” – nobody knows what these mean. 
  1. Illegal clauses. Not all states will honor a non-competition clause imposed on a rank and file employee – California is one of them. 
  1. Integration clauses. The drafter includes an “entire agreement” clause . . . but it doesn’t reference its own schedules and exhibits! 
  1. Backdating deals. Rather than enter into an agreement on November 30, 2016 that is effective as of June 30, 2016, the drafter wants to pretend the contract existed before it was actually signed. Under the wrong circumstances, the drafter opens herself up to fraud claims. 
  1. Termination. Includes material breach as a way to terminate, but doesn’t say if the non-breaching party still gets paid from the party in breach. The non-breaching party gets injured twice. 
  1. Training. An agreement to provide training, without any details on the number of hours or for how many weeks the training will last.

Sometimes the pitfalls come in piecing together an agreement from multiple sources, grabbing a document you’ve used before and trying to repurpose it to a new situation, or downloading a “boilerplate” agreement from the internet for free. Whatever the method, it usually ends up costing you more to have your attorney fix your attempt at drafting than it would have been to have your attorney draft the documents from the get-go.

Startup Law Unplugged with General Assembly

Join us in Downtown, Los Angeles on Wednesday, September 28th from 7:00pm – 8:30pm for our “Startup Law Unplugged” event with General Assembly!

This event is designed to be more of a workshop for attendees than just a speaking event, so we will open the floor to questions from attendees – right from the start! If there are no questions up front, we will speak on topics our entrepreneur clients encounter along the way.


  • 10 minute introductions
  • 50 minute Question & Answer session / discussion on common topics for entrepreneurs
  • 30 minute networking afterwards

Sign up here:



Mottek on Money interview

I am please to announce that I was interviewed last week by Frank Mottek for his  radio show, ‘Mottek On Money’,  which airs on KNX 1070. I spoke about our first time entrepreneurs workshop with the LA Venture Association (LAVA), as well as recent trends for technology startups in Silicon Beach.

Click below to listen to the podcast of the interview (I’m at the 19:25 mark).

Mottek On Money (Sept. 10, 2016)

“Mottek On Money” airs 11am on Saturdays and 8pm on Sundays on KNX1070.



New Book! ‘Winning the Game’

I am thrilled to announce that I just published my second book!

Winning the Game:  How to Successfully Sell Your Business” is the companion to my first book on venture capital for first time entrepreneurs.

By reading Winning the Game, you’ll learn how to successfully sell your business using the advice of a corporate lawyer with $6+ billion in merger & acquisition experience. This book breaks down the lessons that a business owner needs to learn to have a successful exit. Each chapter is geared toward explaining in simple terms what a business owner needs to know about finding buyers and getting to a deal. The book guides the reader through challenging concepts like earnouts and indemnification in an easy-to understand format. The author shares life lessons from other business owners to help the reader avoid pitfalls.


Winning the Game is live on Amazon now and is currently listed as the #1 New Release in Consolidation & Merger!

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Last Call: First Time Entrepreneur Workshop

This is the last call for our First Time Entrepreneur workshop on Saturday June 18th!

The program is open to entrepreneurs that are starting companies in areas that are likely to draw venture capital investment. The program is not open to service providers.

During our five hour program, you will learn how to:

  • Determine the value of your company
  • Put together a capitalization table
  • Understand how VCs screen potential investments
  • Understand the differences between trademarks, copyrights and patents and when you need them
  • Choose co-founders
  • Network at startup events — the right way

Saturday June 18, 2016 (10am-3pm)

Santa Monica Place Mall – EXPERT DOJO ,(The Old Redwood Grill, Next to the Cheesecake Factory)
395 Santa Monica Place
The Community Room – 3rd Floor
Santa Monica, California  90401

For more information and how to register, please click here:

Reminder: First Time Entrepreneur Workshop

Don’t forget about our First Time Entrepreneur workshop on Saturday June 18th!

We will be teaching about valuation, dilution, intellectual property rights, working with co-founders, and a variety of other topics that are critical for startup founders to master.

Saturday June 18, 2016 (10am-3pm)

Santa Monica Place Mall – EXPERT DOJO ,(The Old Redwood Grill, Next to the Cheesecake Factory)
395 Santa Monica Place
The Community Room – 3rd Floor
Santa Monica, California  90401

For more information and how to register, please click here:


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By Andy Beal and Matt Crowley

Before Congress passed the Jumpstart our Business Startups (JOBS) Act, startups were prohibited from offering and advertising the sale of stock to the general public. You could not offer shares of stock on your website or in a newspaper.

The JOBS Act attempts to lifts some of these restrictions in an effort to make fundraising easier for startups. One step taken by Congress was to loosen the rules on soliciting the public to buy stock from startups.

The Act required the Securities and Exchange Commission to write new rules to explain how startups can offer stock to the general public. On August 29, the SEC issued 69 pages of proposed rules related to advertising offerings and soliciting the general public. We thought it would be helpful to summarize the proposal for you.

Under the SEC’s proposed rules, a startup can advertise to and solicit the general public, but can still only sell to accredited investors.

What does this mean for a startup?

Under the proposed rules, a startup must take reasonable steps to verify that purchasers are accredited investors. The SEC did not provide a list of reasonable steps, so the rules are not very helpful at the outset.

However, the proposed rule does give some hints:

In short, the rule says that what steps are reasonable depends on the circumstances of the transaction. In other words, every deal is different. What is reasonable under one set of circumstances may not be reasonable under another set of circumstances. To clarify, the SEC included a nonexclusive list of factors that a startup should consider:

What qualifies someone as an accredited investor? Most startups raise money from individuals. An individual who has a net worth of at least $1 million, or with an annual income is at least $200,000 qualifies. Determining whether someone has the requisite net worth or annual income may require requesting individual financial records, tax returns, etc. The SEC understands that this information is not public and may not be easily found. For this reason, the startup may not be required to do as much diligence on an investor who qualified because of his or her net worth or income.

How much, and what kind of, information do you need to obtain about a potential investor? The more information a startup has, and the more credible that information is, the less steps a startup needs to take to verify the status of an investor. Publicly filed information is very helpful in this situation. For example, if the potential investor is an executive of a public or reporting company, the annual report containing his or her compensation information would be a reliable source.

How did you go about the offering, and what are the terms? This is where the “facts and circumstances” of the offering dictate the reasonableness of a startups actions. The SEC provided a rare example to illustrate this factor – if a startup is soliciting investors through email or social media, simply having the investor check a box on a questionnaire is not a reasonable step in verifying the person’s status as an accredited investor. On the other hand, if the issuer advertised the offering to a database of pre-screened accredited investors, having each potential investor check a box on a questionnaire is a more reasonable step. Basically, the SEC is saying that it is not reasonable to rely solely on an investor’s representation that he or she is an accredited investor.

The SEC’s rule writing process involves an open comment period that allows anyone to submit concerns, opinions and suggestions. One comment that the SEC agreed with was that if your offering has a high minimum investment amount, say $500,000, an investor’s ability to satisfy the minimum amount can be taken into account when you are trying to determine whether that person is an accredited investor or not. In other words, the fact that the investor is capable of investing $500,000 can be partially relied upon in concluding that an individual is an accredited investor.

One thing to always keep in mind, regardless of the steps you take, is that every company issuing securities must keep records of the steps taken to verify an investor’s status, because the issuer has the burden of proving that the steps they took were reasonable.

Don’t be like Qwiki – tough story from SFGate

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As Social Media Slows, Tech Branches Out

by Casey Newton

As models dressed as stewardesses milled around inside a SoMa warehouse handing out champagne, the startup founder attempted once again to describe his product.

Holding an iPad loaded with the application made by his team, he tapped items on a map of San Francisco and launched a series of narrated animations of city landmarks. The Castro, Coit Tower, the Ferry Building – they whizzed merrily around the screen, as a chirpy robot woman read their respective Wikipedia entries aloud.

This was Qwiki, a company that has raised more than $10 million to do – something. It won a competition among startups hosted by the influential blog TechCrunch, which announced in a headline: “Information consumption to be disrupted.”

A year later, we may be consuming information differently, but for most of us Qwiki hasn’t had much to do with that. The app was handsome enough, I remember thinking at that party in April 2011, but who really needed a robot to recite Wikipedia entries to them?

“This is it,” I said to my colleague James Temple, who had come along to see Qwiki himself, as throngs of people all around us drank fancy cocktails and ate food catered from high-end local restaurants. “A bubble.”

I’ve had many moments like that since I began to cover technology in San Francisco two years ago. Much of the time, the innovations on display here make me proud to live in a city where so many devote themselves to building something new.

Bubble trouble?

Dropbox lets me access all my documents wherever I am. Square lets me pay for my coffee at Cafe Sophie in the Castro just by saying my name. Uber lets me get a ride out of SoMa at 2 a.m. when prospects for getting a cab are slimmer than seeing the sun at Ocean Beach.

These are homegrown businesses, built by neighbors, and they are something to behold.

Other times, as when Qwiki founder Doug Imbruce told me his company would “improve the way our world consumes information by transforming it into a human experience,” I wonder if I may have recently and unwittingly been sniffing glue.

Lately, others have wondered whether the sector that spurred San Francisco’s tech scene to new heights this decade might itself be coming down from its high.

“Has the social media bubble burst?” asked a barrage of headlines in July and August.

Said Reuters reporters Gerry Shih and Sarah McBride in late July:

“Social media companies, once hailed by their Silicon Valley boosters as world-changing businesses with limitless potential, are instead proving a sobering reminder of how investors can be seduced by Internet hype.”

The poor stock performance of high-profile stocks in the space – notably Pandora, Groupon, Zynga, and most of all Facebook – led some to conclude that the end is nigh.

And anecdotally, at least, there is evidence that startups are slowing down. Invitations to high-profile launch parties are trickling in a bit slower than they were the spring that Qwiki launched. In those days, hardly a week went by when some new smartphone app dedicated to sharing photos more easily failed to announce itself in my inbox.

Sudden stop

Then photo-sharing star Instagram hit 30 million users, Facebook bought it for a deal then once valued at $1 billion, and that particular party came to a sudden halt. (Last month San Francisco’s Synthetic Labs, makers of the popular Hipstamatic camera app, laid off much of its staff.)

But the evidence suggests that in San Francisco’s tech scene, the good times will roll on for a while yet – just in other, more fruitful directions.

Y Combinator, the Mountain View startup accelerator that has helped to launch some of the era’s biggest companies, accepted its largest class ever during the summer cycle: 84 startups. At its demonstration day last month, the more promising startups avoided the social sphere and concentrated instead on e-commerce, crowd-funding and services sold directly to other software developers.

(There was also a company called Double Robotics that is making a remote-controlled, motorized stand for your iPad that resembles a Segway. It has to be seen to be believed and is really quite awesome.)

And that’s to say nothing of other San Francisco successes, which are the envy of the tech world. Twitter, Square, Dropbox, Airbnb and Uber are just a handful of businesses that are already or are likely to be billion-dollar businesses. None of their fortunes depend heavily on the price of Facebook stock.

As for Qwiki? Things didn’t quite work out as planned.

I wasn’t the only one having trouble figuring out what Qwiki was. A couple months after the iPad launch, co-founder Louis Monier left the company. In June, the remaining staff moved to New York.

Hype never dies

According to a recent post on the (San Francisco!) question-and-answer site Quora, the company plans on coming out with an iPhone app soon.

In his post, Imbruce described it as “a drastically revamped product that we hope will revolutionize social sharing.”

Another revolution. About time! Things were starting to get a little dull around here.

And so I look forward to Qwiki’s next launch.

It ought to be one hell of a party.

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