Stubbs Alderton & Markiles, LLP is one of the leading start-up law firms in Southern California. We pioneered a fixed fee start-up package making the formation and organization of your start-up as seamless as possible. Our Preccelerator Program is a platform offered to select start-up companies out of our Santa Monica office that provides interim office space and sophisticated legal services, with the objective of helping you grow your idea from business concept to funded startup. The Preccelerator Program provides free co-working space and other perks for 5-6 promising young startups.
The perks include:
For more information about the Preccelerator Program, visit https://stubbsalderton.com/preccelerator or contact Heidi Hubbeling at (310) 746-9803 or
Stubbs Alderton is featured in the November 12th LA Business Journal story: "Catching the Wave - Service providers flock to Westside to shore up Silicon Beach clients." The article specifically features SAM PartnersLouis Wharton, Greg Akselrud and Kevin DeBré, as they discuss our launch of a Santa Monica office and commitment to the LA startup scene. See more here.
Santa Monica, Calif., November 8, 2012 – Stubbs Alderton & Markiles, LLP, a leading Southern California business law firm, announced today the opening of its Santa Monica office. The firm, already boasting a broad practice representing emerging growth and technology companies, large technology, consumer electronics and internet companies, and entertainment and video game companies, now has a second Los Angeles office to serve the area’s robust and growing technology, digital media and start-up community in Silicon Beach.
Stubbs Alderton & Markiles also announced the launch of its Preccelerator program for startups looking to access accelerators and venture capital. The Preccelerator will offer on a rolling basis 5-6 entrepreneur groups or start-ups free co-working space as well as the ability to leverage the firm’s resources, including access to legal services, business plan reviews and introductions to sources of capital and service providers offering targeted expertise.
“Since founding the firm more than 10 years ago, we have been committed to the growing venture capital and start-up communities in Southern California, and in Silicon Beach specifically,” said Scott Alderton, a founder and managing partner of Stubbs Alderton & Markiles. “As this area continues to foster the growth of startups, accelerators and venture capital firms, we wanted to demonstrate our commitment to Silicon Beach. We believe there is no better way to do that than being there full-time.”
Founded in 2002 by Joe Stubbs, Scott Alderton, Murray Markiles, John McIlvery and Greg Akselrud, Stubbs Alderton has grown to 17 lawyers and possesses a broad practice representing emerging growth and technology companies, middle market public companies, large technology, consumer electronics and internet companies, investors, private equity funds, investment bankers and underwriters, and entertainment and video game companies in all aspects of business formation, corporate transactions, seed and venture capital finance, securities, mergers & acquisitions and internet, mobile and other intellectual property transactions. Partners Joe Stubbs, Scott Alderton, Kevin DeBré, Greg Akselrud and Louis Wharton will have offices in Santa Monica.
The firm understands the business challenges faced by companies and provides contextual representation throughout the growth and life cycle of its clients.
“Our Preccelerator program is not intended to compete with the existing Silicon Beach accelerators that are doing so much for our community, or provide initial funding to startups, “ added Alderton. “Rather, we will provide a platform for them to get interim office space and sophisticated legal services, and to ultimately grow their ideas from business concept to funded startup. We hope that the platform will allow entrepreneurs a streamlined transition to an accelerator program, financing or to otherwise launch their businesses.”
For more information, or to apply to the Preccelerator program, visit our Preccelerator site.
About Stubbs Alderton & Markiles
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions and intellectual property practice groups focusing on the representation of venture backed emerging growth companies, middle market public companies, large technology and internet companies, entertainment, video games and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, video games, apparel, consumer electronics and medical device sectors. The firm’s mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of the firm.
V. Joseph Stubbs is a founder and partner of the firm and co-chair of the Venture Capital and Emerging Growth Practice Group. Joe practices in the areas of corporate and securities law, emphasizing the corporate representation of both publicly-held and privately-held growth and middle-market companies, venture capital firms, angel investment groups and investment banks. He acts as outside general counsel to numerous emerging growth and technology companies, advising on a wide range of legal and strategic issues at each stage of a company’s evolutionary path.
Scott Alderton is a founder and partner of the firm, and co-chair of the Venture Capital and Emerging Growth Practice Group. Scott is a corporate and technology lawyer who focuses exclusively on advising middle-market, technology, emerging growth, and development stage companies in the areas of corporate and securities, mergers and acquisitions, high technology, business, licensing, intellectual property, the Internet and multimedia.
Kevin DeBré is chair of the firm’s Intellectual Property Group and advises entrepreneurs and companies engaged in building businesses based upon technology or intellectual property assets and he has particular expertise in structuring and negotiating intellectual property-driven deals. A business lawyer, a registered patent lawyer and a former engineer, Kevin handles a wide range of transactions, develops IP protection strategies and advises management teams on compliance with privacy and data security laws and regulations.
Greg Akselrud is a founder and partner of the firm and chair of the firm’s Internet, New Media and Entertainment practice group. Greg acts as outside general counsel to entertainment, Internet, apparel, digital media and other technology companies in a variety of corporate, financing and transactional matters; serves as strategic counsel to clients, representing their interests in investment transactions, joint ventures and mergers and acquisitions; and serves as primary counsel to publicly-held companies, providing advice on all aspects of their business activities, securities filings and public and private offerings.
Louis A. Wharton is a partner of the firm. Louis’ practice focuses on advising startup, emerging growth and middle market companies across a spectrum of industries in securities compliance, corporate finance, mergers and acquisitions and general corporate matters. He counsels clients in the technology, internet/e-commerce, pharmaceutical, apparel and entertainment industries, among others.
Contact:
Heidi Hubbeling
Director of Marketing
(818) 444-4526
Stubbs Alderton & Markiles, LLP – Office Locations
Santa Monica
1453 3rd Street Promenade
Suite 310
Santa Monica, CA 90401
Sherman Oaks
15260 Ventura Blvd.
20th Floor
Sherman Oaks, CA 91403
What is founder restricted stock?
Founder restricted stock refers to shares of common stock that are owned by a founder but are subject to forfeiture upon the occurrence of certain contractually agreed upon events. The forfeiture usually comes in the form of the company’s right to repurchase the shares for a previously agreed upon repurchase price. The repurchase price is generally equal to the price the founder paid for the restricted stock, typically a nominal amount. The company’s repurchase right in most cases is triggered by a termination of the founder’s employment or other service with the company, but can also be triggered by whatever other events the company and the founder agree upon.
As a founder, why would I want restricted stock?
Founders use restricted stock to ensure that the other founders continue to provide services to the company. This particularly comes in handy when there are multiple founders. Without the company’s ability to repurchase the founder stock, a founder may leave the company within three months after the company is formed and still own a significant percentage of the company. Also, let’s fast forward three years down the road when the company is sold for hundreds of millions of dollars. Even though that founder did not contribute to the success of the company, they would still be able to cash out their shares just like the founders who actually sacrificed their blood, sweat and tears for the company.
Restricted shares that are reclaimed from former founders can then be used by the company to allocate to new team members brought in to replace the departed founder.
In addition, investors in the company typically require founders to receive shares of restricted stock. When investors invest in a company, they are really investing in the founders and will want to incentivize the founders to continue working to build the company’s success. Therefore, if the founders want to receive funds from investors during venture capital rounds, they will generally be required to subject their shares to a company repurchase right.
Will my restricted stock always be subject to a repurchase right?
Generally, the company’s repurchase right gradually lapses over time pursuant to an agreed upon vesting schedule. Unlike stock options, the use of the term “vesting” in connection with restricted stock does not refer to the founder’s ownership of the restricted stock. A founder owns 100% of the restricted stock when it is issued. The use of the term “vesting” refers to the lapse of the company’s repurchase right with respect to the restricted stock. Founders typically have a vesting schedule pursuant to which the company’s repurchase right lapses over a period of three or four years.
I have heard the terms “single trigger” and “double trigger” used in connection with restricted stock. What do they mean?
The company and a founder can agree to accelerate the vesting of restricted stock upon the occurrence of certain events. When only one event needs to occur to trigger the acceleration, it is referred to as a “single trigger” and when two events need to occur to trigger the acceleration, it is referred to as a “double trigger”. Common events related to the acceleration of the vesting of restricted stock include a change in control of the company (i.e., a merger or sale of the company) and the firing of the founder without cause. If acceleration is based on a “single trigger”, then the occurrence of any one of these events would cause the company’s repurchase right to automatically lapse with respect to all or a portion of the restricted stock regardless of the vesting schedule. If acceleration is based on a “double trigger”, then both events would have to occur to accelerate the vesting of the restricted stock.
Section 83(b) of the Internal Revenue Code
The issuance of restricted stock may have tax implications related to Section 83(b) of the Internal Revenue Code.
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For more information regarding Restricted Stock or similar inquiries, please contact or (818) 444-4529.
It’s official. Crowdfunding is law.
What is crowdfunding? Crowdfunding has been used to describe a number of methods that enterprises and collections of people may use to fund or support various initiatives. For startup companies looking to raise debt or equity from the sale of securities, crowdfunding refers to raising such funds, primarily over the Internet, in smaller amounts from a larger pool of investors though intermediaries.
On March 27, 2012, the House accepted the Senate version of the Jumpstart Our Business Startups Act (the “JOBS Act”) which provides for amendments to our securities laws to allow for crowdfunding activities. President Obama signed the JOBS Act into law on April 5, 2012. In order for crowdfunding to get underway, the SEC and other regulatory agencies will need to adopt certain rules and regulations implementing the new law. The law provides that these measures should be adopted within 270 days of signing by the President, and the SEC has already begun to collect comments from the public for this purpose.
This is exciting news for companies that are attempting to raise capital. Title IV of the JOBS Act will allow business enterprises to raise capital through crowdfunding initiatives. These companies can raise capital from individual investors by offering stock for sale through their third-party intermediaries. The JOBS Act adds a new Section 4(6) to the 33 Act, which provides a new exemption for the small business from registration for the offer and sale of securities in connection with crowdfunding transactions. The exemption would be available for offerings not greater than $1M in the aggregate during any twelve month period, subject to further limitation on a per investor basis. The amount sold to any particular investor during a twelve month period by all crowdfunding issuers may not exceed:
(A) for investors with less than $100,000 in net worth or annual income, the greater of $2,000 or 5% of their annual income or net worth, and
(B) for investors with greater than $100,000 in annual income or net worth, up to 10% of the investor’s annual income or net worth, not to exceed $100,000.
Securities issued pursuant to the new 4(6) exemption will be considered (1) “covered securities” which means that they will be exempt from state Blue-Sky registration and (2) “restricted securities,” subject to Rule 144 restrictions for public resales. The one-year restriction on resale described above would apply to private as well as public resales. Another benefit to small businesses – the crowdfunded investors will not count against the shareholder cap for triggering public reporting requirements with the SEC.
As described above, sales of securities under the new crowdfunding exemption must occur through third-party intermediaries. Who can serve as an intermediary? An intermediary must be a registered broker or funding portal (as defined in new Section 3(a)(80) of the 34 Act). It is not specified whether the intermediaries must be an electronic system or manual brokerage operation.
Regulations still need to be adopted regarding these intermediaries. Funding portals will be required to register with the SEC and any applicable self-regulatory organization, but are conditionally exempt from registration as a broker dealer. It is expected that FINRA will become the self-regulatory organization.
What will it cost? Restrictions regarding fees and how much an intermediary may charge an issuer or investor in connection with a transaction are not specified. However, the JOBS Act does provide that the intermediary and its directors, officers or partners cannot have a financial interest in an issuer using its services, which would presumably preclude taking stock for providing the service. Intermediaries also may not compensate promoters, finders, or lead generators for providing them with the personal identifying information of any potential investor. Other restrictions regarding disclosures, risk, cancellation and protection of privacy have been set in place for intermediaries and issuers to protect investors and reduce the risk of fraud with respect to such transactions. It is expected that these restrictions will be further clarified as the SEC adopts the needed regulations.
How does the JOBS Act compare against Rule 506 under Regulation D? Separate from the crowdfunding measures, the JOBS Act also requires that the SEC amend Rule 506 under Regulation D to permit allow general solicitation in 506 offerings in which sales are made only to accredited investors. It also provides for an exception from broker-dealer registration requirements for platforms or mechanisms that aim to facilitate offerings under Rule 506 of Regulation D. More specifically, a person (including a platform or other service provider and its associated persons) would not be obligated to register as a broker-dealer for engaging in any of the following:
(A) permitting offers, sales, purchases, negotiations, general solicitations or similar activities in connection with a 506 offering,
(B) co-investing in the 506 offering, or
(C) providing ancillary services, such as due diligence and documentation, in connection with the 506 offering.
To be eligible for this exemption, however, the person and its associated persons:
(A) may not receive any compensation in connection with a purchase or sale in the 506 offering,
(B) may not have possession or control of customer funds or securities in connection with a purchase or sale in a 506 offering, and
(C) may not be subject to statutory disqualification, as defined in the 34 Act.
Rule 506 may therefore serve as an alternative type of “crowdfunding” exemption for accredited investors without any of the limitations in related to the new Section 4(6) exemption for crowdfunding.
This is an exciting time for emerging growth and other small companies who now have additional innovative opportunities to raise capital. We will continue to monitor this development provide updates as they become available. For more information regarding this Alert, contact John McIlvery, Group Chair of SAM’s Public Securities practice area.