1. Financing Options
Scott M. Stanton
Partner
Morrison & Foerster LLP
Lab to Launch – San Diego
2. Choosing the Best Entity for Your Venture
• Corporations and Limited Liability Companies
– Both have limited liability for owners/managers
– Tax treatment can differ
• C Corporation’s earnings are taxed at corporate level
• S Corporation and LLC are pass-through entities
– Corporations are more common as investment
vehicle in start-ups
• Delaware vs. California
Lab to Launch – San Diego
3. Control Issues
• Corporations
– Stockholders
– Board of Directors
– Officers
• Limited Liability Companies
– Members
– Managers
– Managing Members
– Officers
4. Contributions to the Venture
• Intellectual Property
– Clearly defined assignment
– Patents
– Business plans
– Licenses
• Capital – Adequacy and segregation to avoid
piercing the corporate veil
• Keep the Stated Value Low
5. Equity on Formation
• Authorized vs. Issued
• Common vs. Preferred
• Founder Stock
– Pricing
– Vesting
• Upfront and Term
• Acceleration
– Repurchase rights
6. Sources of Funds
• Yourself • Angels
• Friends & Family • Crowd Funding
• Seed Capital • Equity Crowd
• Bank Loans Funding (coming)
• Government Grants • VC’s
• Business/Trade • Strategics
Credit
7. Legal Issues of Offering Securities
• No General Solicitation (for now)
• Accredited Investors
• Unregistered Finders
• Crowdfunding with equity
• Registered Portals
• $1M per year
• Investor limits
– Income/net worth tests
– Max of $100k if investor income/net worth over $1M
