Archive for December 2015

By: Christopher Mirabile, ACA Chair and Launchpad Venture Group

This post originally appeared on Inc.com

There are many options – and traps, when it comes to financings. We’ve talked about the virtues of priced rounds relative to convertible debt, as well as the key concerns of founders in approaching financings.  However, one of the most fundamental considerations is the question of valuation.

When it comes to pre-money valuations, higher is always better, right? This is certainly a common misconception held by many entrepreneurs. Here’s why it’s wrong.

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Tax Benefits - The holiday party starts early with a gift from Congress

The House and Senate passed the PATH Act (Protecting Americans from Tax Hikes) which included the Angel Capital Association’s top tax priority, extension of Section 1202 of the US Tax Code which allows a 100% exclusion of gains on Qualified Small Business Stock has been made permanent. ACA will continue to support reform of this tax exemption, such as reducing the current minimum five year holding period, in future tax reform. ACA commends our champions who have promoted a tax code that rewards innovation and job creation: Senator Ron Wyden (D-OR), Senator Maria Cantwell (D-WA), Congresswoman Lynn Jenkins (R-KS) and Congressman Ron Kind (D-WI).  Thanks also to our government affairs leaders, Chris McCannell and Joel Riethmiller.

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Accredited Investor Definition – A mix of gifts and lumps of coal in our stockings

Not far from the US Capitol Building, the SEC quietly released a report from its staff on the Accredited Investor definition on the same day.  As many angels will remember, the SEC is required to study the definition by Congress in the Dodd-Frank Act.  Time will tell if this staff report fully addresses the requirement or if it informs future rulemaking by SEC Commissioners.

To ACA’s delight, some of the recommendations in the report actually match what our leadership has suggested in multiple meetings and letters, such as allowing people who are sophisticated but don’t meet financial thresholds to be accredited.  As in many things, however, there are also some recommendations in the report that are different than most angels would like.  All in all, the SEC staff’s report could have been much worse – for instance it does not include increasing financial thresholds for income to $450,000 and wealth to $2.5 million as some organizations advocated.

By: Marianne Hudson, ACA Executive Director

Angel group valuations and deal sizes are on a huge growth trajectory according to the HALO Report through the third quarter of 2015.  The report, released today by the Angel Resource Institute at Willamette University, shows the median seed stage valuation at an all-time high of $4 million, a 33 percent increase over 2014.  Some of this is reflected in median round sizes, which more than doubled in one year - $350,000 in Q3 2014 to $725,000 in Q3 2015.

These increases are a really big deal for the angel group community, and I hope that these trends reverse themselves soon.  As ARI’s Vice Chairman of Research Rob Wiltbank said, “This report reinforces the trends that we have been reporting on for the past several quarters, particularly the rise in all round sizes and pre-money valuations. These trends have a significant impact on the way that angels and entrepreneurs plan for the future when raising capital.”

By: Elizabeth Usovicz, General Manager of Transaction Commons, as part of a series she writes for ACA aimed at entrepreneurs, "Your Pitch is Just the Beginning."

If you’ve attended or presented at a startup pitch event, you’re familiar with the entrepreneur’s pressure to provide a comprehensive, entertaining and compelling view of the company in just a few minutes. At many events, a moderator or attendee asks the presenters, “How can I/we help your company?”

Several months ago, I began to notice a sameness across different pitch events in presenters’ answers to this question. It didn’t seem to matter whether the question was asked in front of a large audience, in small group or during a one-on-one conversation.

By: Marianne Hudson, ACA Executive Director

Crowdfunding experts have poured through the 685 pages of SEC rules and created a reasonable 43 page practical guide on how equity crowdfunding for the masses work.  Take advantage of this step-by-step guide that Crowdfund Capital Advisors have put together for entrepreneurs to raise funds when the rules allow it beginning May 16, 2016.

By Daniel DeWolf, Chair, Technology Practice Group and Co-Chair, Venture Capital and Emerging Companies Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.  He is also a member of the ACA Public Policy Advisory Council. 

This article originally appeared in VC Experts.

The SEC has finally provided clarity as to how an issuer of securities can conduct a private placement in a password protected web page under Rule 506(b), without it being deemed a “general solicitation” and thereby being subject to the additional requirements imposed by the new Rule 506(c). The guidance has been provided by the issuance of the Citizen VC No Action Letter (the “CVC Letter”), which request was authored by Mintz Levin.

Subscribe

Tapping into America’s Biomedical Seed Fund by Ethel Rubin  on  February 12
The Seraf Method to Valuing Startups: Exit Practicalities by Ham and Christopher LM  on  January 16