This week’s articles focus on a hazardous time for any company: the first five years. Half of all startups fail in this period. What common money mistakes could you be making, and what unorthodox advice could set you on the road to success? Finally, a profile of a young startup that faces some real competitive challenges.
According to the latest MoneyTree second quarter 2011 press release prepared by the National Venture Capital Association, PricewaterhouseCoopers and Thomson Reuters, venture capital activity has increased with a total of $7.5 billion invested in 966 new companies nationwide during the second quarter ending June 30.
A recent article in Xconomy highlights the biggest VC investments of the quarter. Goodwin Procter represented investors in the two biggest deals, a $165 million investment in Boston-based CSN Stores and a $138 million investment in New York-based Gilt Groupe.
Venture capital investments in Boston companies are soaring as new capital continues to pour in. Goodwin Procter has played a central role in these deals, representing investors in five of the top ten biggest Boston deals, including CSN Stores (mentioned above), General Compression, Blueprint Medicines, Zafgen, and Lotus Tissue Repair.
This post on Venture Capital was authored by Founders Workbench.
There has been a lot of talk in the deal press recently about the treatment of former employees’ vested options in the wake of Silver Lake’s sale of Skype to Microsoft. Former Skype employees, including Yee Lee, cried foul at Silver Lake’s clawing back of their vested options, saying that they were not aware of the clawback right and that such right was not consistent with “industry standards.”
The questions of whether there is an industry standard for treatment of options for former employees and, if so, does it differ from the provisions included in the Skype option plan have been the subject of much debate recently? It is clear that many venture capital analysts believe that the clawback provision was not in keeping with the “industry standard” and, some have argued that the provision amounted to an intentional trick aimed at preventing departing employees from sharing the benefits of any exit event. Others in the private equity press have argued that for private equity deals a clawback provision in the event that an employee voluntarily terminates his or her employment is not an unusual provision.
These differing reactions seem to point to a distinction between the nature of venture capital investing and private equity investing. Venture capital investments involve earlier stage investments that are inherently more speculative and have a longer path to liquidity Additionally, employees of early stage (particularly pre-profitability and/or pre-revenue) companies often work for reduced compensation relative to the employees of later stage profitable companies. Given these risks and sacrifices, the predominant view in the venture capital community appears to be that existing employees should be able to retain the equity they have vested in by exercising their options, even if they depart their company prior to an exit event. As these risks and sacrifices tend to be less prevalent for later stage companies, the predominant view in the private equity community appears to be that features such a clawback of vested shares for former employees are more appropriate and serve as an incentive to encourage retention of employees through an exit event.
The take away for employees of venture and private equity backed companies is that they should fully understand the terms of their equity awards before joining their company. They should make sure they review all documents related to these awards – typically, an option plan and an option agreement, but there may be other agreements such as a right or first refusal or shareholders agreement. And, if in doubt as to what the documents say, have a lawyer review them.
This post on Employee Equity was authored by Caitlin Vaughn.
This week’s features include advice on how to reel in new clients, typical missteps to be wary of as you launch your new business, and how to build foundations for a future franchise operation. They also include some mental pitfalls that can work against your company’s ultimate success.
Join VC power players, Corporate Investors, Angel Investors and CEOs of cutting-edge private companies convening at the prestigious New York Venture Summit being held on July 20th -21st, 2011 in New York City. NYVS2011 will feature an impressive line-up of active VCs on interactive panels; presentations by 50 Top Innovators from the tech, clean-tech and life sciences sectors and high-level networking opportunities. Whether you’re an investor seeking deals or an emerging company seeking capital and/or partnerships, this is the one event of the year you won’t want to miss! Goodwin Procter is a sponsor.
This week’s stories include simple rules to live by to avoid “scope creep,” poker takeaways, and a two-part handbook for doing deals. They also include insights into the paradox of choice and how it’s best to take social media in stride.
Join Goodwin Procter, leading investors and cutting edge start-ups for the 2011 New York Venture Summit on July 20-21 in New York City. Whether you’re a start-up seeking capital and exposure or an investor seeking new deals, you won’t want to miss the New York Venture Summit™. Click here to register and save $200 by using the promo code “friendsofgoodwin” by Monday, July 18.
A highly productive full-day conference, the New York Venture Summit is dedicated to showcasing early stage venture capitalists and angel investors committed to investing in start-ups, and will feature over 40 VCs and angel investors as speakers. In addition to providing access to active investors, the conference will feature more than 60 top innovators from the technology, life sciences and clean tech sectors, and high-level networking opportunities.
The Pipeline Fund Fellowship (PFF) seeks to train women philanthropists to become angel investors in women-led for-profit social ventures. PFF’s goal is to diversify the investor pool and connect women social entrepreneurs with women investors. The six-month program focuses on education, training and practice. Goodwin Procter had the pleasure of hosting the first-ever PFF Conference in early April. Over 75 attendees from the entrepreneur and investor community spent the day learning about the ins and outs of angel investing with panel presentations from experts in the field.
The program culminated with a Pitch Summit at the Eileen Fisher headquarters where the 2011 Pipeline fellows listened to pitches from 10 companies vying for a $50,000 investment which the fellows will award. I attended the Pitch Summit and had a chance to share with the fellows and entrepreneurs a list of top 10 “lessons learned” from working with various start-ups and entrepreneurs. I also got to sit in on the pitches which included presentations from really promising companies including 6dot, DiaperBuds, Gifts That Give, Just Shea, Nomi Network, Pengo, PhilanTech, PROUDgirls, Skwikee and the LuminAID Lab. Each company presented a compelling business model with a social venture aspect. It will be interesting to see which company the fellows select and then to track the company’s progress. Even more interesting though will be to follow the fellows after the program ends as they enter the investor pool as a prospective angel investor.
Read more about the companies that pitched on Triple Pundit and more about the Pipeline Fund and its fellows:
Goodwin Procter partner Caine Moss comments on the capital scarcity in today’s crowded fundraising market as discriminating investors begin to weed out non-performing firms in June’s Venture Capital Journal article titled “To Have and Have Not”
We thought we’d switch it up a bit this week and feature three individual success stories and what they can teach you. As you set out to pen your own success story, don’t miss David Gass’ 10 suggestions for identifying and working with angel investors.