Tagged: startup

Sept. 16: First Time Entrepreneur workshop

Calling all first time entrepreneurs!

LAVA’s fall First Time Entrepreneur workshop is scheduled for  Saturday, September 16, 2017!

We will also have a special guest speaker: Venture Investor Buck Jordan, of Canyon Creek Capital

At this workshop you will learn how to:

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

 

For more information and to sign up, visit: First Time Entrepreneur Workshop.

 

crowley-logo5757

Jan 21st: First Time Entrepreneur workshop

We are already preparing for our first event of 2017!


JOIN US ON SATURDAY, JANUARY 21st
FOR LAVA’S FIRST TIME ENTREPRENEUR WORKSHOP!


At this workshop you will learn how to:

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

 

Date:     Saturday, January 21, 2017
Where: Crowley Corporate Legal Strategy 
               15840 Ventura Boulevard, Suite 311
               Encino, CA 91436

For more information and how to register, visit: First Time Entrepreneur Workshop

Dangers of drafting your own documents

SHOULD I PAY A LAWYER TO DRAFT A CONTRACT OR JUST PLUG NAMES INTO A TEMPLATE – WHAT COULD POSSIBLY GO WRONG?

1195442352382851478zeimusu_warning_sign-svg-med

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.

Stock appreciation rights: an alternative to stock options

A company that is able to make distributions to founders might not want to also make these distributions to employees, which would be required if employees ultimately become stockholders via a stock option plan. This is where Stock Appreciation Rights (“SARs”) can be useful, as an alternative to stock options. SARs essentially give employees a lottery ticket – if the company is sold, the SARs employees have the right to participate in receiving some of the sales proceeds. A SAR, or “phantom stock”, is the right to receive money on the sale of a company, not a right to receive stock of the company.

How does this work?

When a SAR is granted, there is an initial SAR price as of the date of the grant. This initial price can be determined several different ways, but we recommend using a 409A valuation.

A 409A valuation is generally used when implementing a stock option plan and is a good, independent way to figure out the value of a SAR, as well. A 409A valuation is prepared by a third-party company (a valuation firm) based on several factors, including the current and historical financials of the company, an industry analysis, and a check on the company’s competitors. The valuation firm then determines the fair market value of the stock, which can be used by the company under the 409A safe harbor rule for 1 calendar year – or until there is a material change in the company that would affect the fair market value of the stock, at which point a new 409A valuation would need to be completed.

Once the initial value is set, the company can grant SARs to employees, independent contractors, or advisors to give them the right to receive a monetary payout of the increase in value per SAR at a given time or upon a pre-defined trigger event (generally a sale of the company).

Example:  Let’s say Company A grants 10,000 SARs to Employee 1. On the date of grant, the SARs are worth $0.10 each based on the 409A valuation. Per the SAR Agreement, the company chose not to have any vesting in this SAR grant, so all 10,000 SARs are immediately available to Employee 1, but the SAR says that it can only be exercised upon the sale of the company – the defined trigger event. When the company is sold 3 years later, the SARs are now worth $1.10 each and Employee 1 has the right to receive the $1.00 increase per SAR, for a total of $10,000!

As you can see from the example above, the great benefit of granting SARs is that they are very flexible. The company can choose to have SARs subject to a vesting schedule, just like a stock option, so only the vested SARs at the trigger event date are counted. The company can define a time period or trigger event for when the payout to the employee will occur. And employees also don’t have to pay for anything when exercising the SAR, like they do when exercising their right to buy stock under a stock option plan.

The ultimate benefit of issuing a SAR is that the company can give employees a monetary incentive, without issuing any of the company’s stock.

With any major business decision, it’s important to consider the legal and tax implications. Contact your attorney and accountant to discuss the legal and tax implications of SARs for your company.

Last Call! First Time Entrepreneur Workshop on Saturday

Join us this Saturday, September 24, for LAVA’s First Time Entrepreneur workshop!


At this workshop you will learn how to:

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

Date:     Saturday, September 24, 2016
Time:    10:00 am – 3:00 pm
Where: Crowley Corporate Legal Strategy 
               15840 Ventura Boulevard, Suite 311
               Encino, CA 91436

For more information and how to register, please click here: First Time Entrepreneur Workshop

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.

 

 

Thanks to U.S.-Saudi-Arabian Business Council for meeting with the Los Angeles Venture Association (LAVA)

LAVA had a great meeting with the U.S.-Saudi Arabian Business Council at the Beverly Hilton this morning. We were delighted to meet their award winning entrepreneurs; their companies were impressive. A special thanks to Lori Kozlowski, Petra Griffith, Tracy Gray, David Carter and Rich Abramson for joining us.Los Angeles-20130620-00291