A typical sale transaction can take six to eight months to complete from the time the decision to sell is made. Consequently, it is important that any business owner seeking to sell his or her business in the near term take immediate steps. The following are some key questions every potential seller should ask to assess their readiness and some key steps they should take to make sure they are ready for a sale.
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.
When accepting money from outside investors, entrepreneurs are generally asked to give up some degree of control over their start-up, exchanging equity in their company for cash. In an effort to minimize the control they relinquish, upon formation of their company entrepreneurs can grant themselves equity that comes with special rights.
When a venture capital firm is interested in a company it will meet with the management team numerous times to understand fully the business model and to learn more about the management. At some point in the process, the venture capital firm will decide that the investment is worth pursuing and will present a Term Sheet to the company. The Term Sheet (which is a nonbinding letter of intent) sets forth the basic terms and premises upon which the venture capital firm would be willing to invest.
What is my company worth? What should I tell the investors my valuation is for the next round of financing? The easy answer is that your valuation is what the market says it is and don’t tell investors anything!
The way most businesses are initially funded is by the three Fs. That is, by "friends, family, and fools." After all, who else would provide the initial seed capital to start a new enterprise? But self-funding (or relying on friends and families) will only take you so far in building out your new business.
You have raised your friends and family/angel round, built out the beta of your product and have a few early paying customers. Now it is time to raise the money you need to grow from institutional investors. How do you get their attention when so many companies are in the same boat as you? Your executive summary – a one to two page teaser – is the crucial document you need to stand out among the noise and get noticed.
One of the critical keys to a successful venture is aligning the interests of the employees and management with the interests of the shareholders/investors. After all, perhaps the greatest asset of a company is its people. Without a competent and motivated workforce, a venture is unlikely to succeed no matter how great an idea or business concept is involved.
Jeremy Glaser, Co-chair of Mintz Levin's Venture Capital & Emerging Companies Practice, discusses the shift to angel investors in initial financing rounds as venture capital funds move toward later-stage funding.
Over my three decades of practicing corporate law, I have helped hundreds of founders sell their businesses. In the process of helping them achieve a successful transaction, I have noted ten common mistakes that can cost the founders money by way of a lower sale price or higher expenses and that can delay or prevent the successful closing of the sale transaction. If you want to maximize your chances of closing your transaction on time and on the best possible terms, avoid making these common mistakes:
Enacted in June 2015, Regulation A+ allows private companies in Canada and the United States to raise money through general solicitation. Pamela Greene, a Member of Mintz Levin's Corporate & Securities Practice, explains the benefits of a Reg A+ offering over an IPO.