Stubbs Alderton & Markiles client Malauzai, a provider of mobile and Internet banking solutions for community financial institutions, has been acquired by Finastra, a fintech company that builds and deploys next generation technology on an open software architecture the company developed and a cloud system.
Stubbs Alderton attorney John McIlvery has represented Malauzai since its inception through acquisition, demonstrating how SA&M creates and builds relationships with its clients throughout their evolutionary path. Other attorneys participating in the transaction included Caroline Cherkassky and Kelly Laffey.
About Malauzai Software Malauzai was incorporated in 2010 in response to the growing demand for a technology company that could provide innovative mobile solutions for community financial organizations. As a cool company in a cool town with a focus primarily on community financial institutions, Malauzai provides consumer and business digital banking that enhance the customer experience for mobile and Internet banking, ultimately resulting in increased value for financial institutions.
Stubbs Aderton & Markiles and the Preccelerator Program are proud to announce the launch of their Startup Superhero Video Series – featuring SA&M Attorneys, Preccelerator Mentors, and entrepreneurs on topics specific to entrepreneurship and lessons learned throughout the journey.
This week we’re featuring Stubbs Alderton & Markiles attorney Caroline Cherkassky on “Convertible Notes vs. SAFES vs. Priced Round.”
Caroline Cherkassky is senior counsel of the Firm. Caroline’s practice focuses on advising emerging growth, development stage, and middle market companies on a variety of matters, including venture capital and other financings, employee compensation, securities laws compliance, technology transactions, corporate governance, and other general corporate matters. She also advises the funds and other investors that invest in these types of companies.
Speaker: Caroline Cherkassky
Moderator: Heidi Hubbeling
Caroline: I started my practice up in Silicon Valley, where there is lots of emerging growth work and I spent a lot of time there in Big Law. I moved to LA a couple of years ago and really enjoy being part of the boutique law scene here. My practice focuses on emerging growth companies from start-up, incorporation, documents for employees, commercial agreements, fundraising and exit and the Venture Capitals and other people who invest in these early growth companies.
Heidi: On the deal side?
Caroline: Yes, exactly.
Heidi: Okay. Let’s talk a little bit about the fundraising process one of the major lack of education for a lot of startups is the type of vehicle they should use. The type of instrument they should use, when going for funding. There’s a priced round, there’s a convertible note and there is S.A.F.E They are the standard ones for early stage companies, so talk a little bit about the differences and how each is applied.
Caroline: Sure! So, the priced round is really what most people think about when they think about venture financing. The investors in a company agree on a price, the investors write a check, the company gives them shares and they are now equity holders in the company. The investor owns a certain percentage of the company’s capitalization. They also typically get specific investor rights, company applications and lots of negotiation round specific obligations. The convertible note on the other hand is a debt instrument. It means that the investor does not get equity in the company to start with, they get a note which is an obligation that has to be repaid at maturity, but there are certain triggers in there set forth in which the note will convert into equity. Usually some sort of discount to the next round or a cap at evaluation. Last, we have the S.A.F.E which is an acronym for simple agreement for future equity and that’s exactly what it is. It’s document that sets forth the terms on which the investor will get equity in the company in the future. It’s very similar to a note in that it has typically a discount to the next round or some sort of cap in the evaluation in which the S.A.F.E will convert, but its different from a note in the sense that there is no maturity date. There’s no debt obligation and there’s no repayment. So, it is more flexible in that regard.
Heidi: Is one instrument preferred over the other?
Caroline: It really depends on the company and the circumstances. Typically, it comes down to timing and size of the round. The priced round provides a lot of certainty. The investors in the company know exactly how much equity is being exchanged and the amount of money that is being invested. Which is nice for everybody to have that certainty. On the flip side the convertible notes and S.A.F.Es can be really fast. The priced round requires a lot of documentation and often takes much higher fees and timing to negotiate. The notes and the S.A.F.Es on the other hand are pretty quick, but you lose that certainty. So, often we see that there is no hard fast number, but we often see a fluctuation point of around 1 million dollars on the side of financing where it makes sense to do that priced round.
Heidi: Are there certain pit falls that entrepreneurs should look out for each of those?
Caroline: Definitely! One of the big things is the S.A.F.Es and convertible notes they offer a lot of flexibility, but you have these caps and discounts that are negotiated and the investors and the companies don’t do the calculations to figure out how much of the company is being given around. Especially if you do multiple S.A.F.Es or convertible notes and succession, by the time you get to that priced round you may not realize how much equity has been given up. There are some founders who unfortunately, have realized too late that there has been a lot more equity. A lot of dilution.
Heidi: So, this is all important information for start-up companies as they get through their fundraising process so we appreciate you being here.
UCLA School of Law
385 Charles E. Young Drive East
Los Angeles, CA 90095-1476
Located in UCLA’s back yard, the Silicon Beach economy is exploding. This inaugural conference will explore the legal and policy issues faced by more than 500 tech startups, incubators and accelerators as well as companies like Snap. Attend the conference to understand the issues critical to this burgeoning hub of entrepreneurship in West LA and the beach cities of Santa Monica, Playa Vista and Venice.
The Silicon Beach Conference will address three important areas all with a focus on the businesses we see here: governance, financing and acquisitions. Our governance panel will look at various structural approaches, including dual class stock structures. The financing panel will explore the SEC’s pro-IPO initiatives as well as the emerging Initial Coin Offering debate. Finally, the panelists will look to the LA and Silicon Beach acquisitions market and how to support and grow M&A in Silicon Beach.
Opening Remarks Joel Feuer, UCLA School of Law
Corporate Governance and Founder Control Ken Bertsch, Council of Institutional Investors
David Berger, Wilson Sonsini Goodrich & Rosati Caroline Cherkassky, Stubbs Alderton & Markiles
Chris Shoff, Latham & Watkins
Moderator: Stephen Bainbridge, UCLA School of Law
Financing of Start-Ups and Emerging Growth Companies Lona Nallengara, Shearman & Sterling Nick Hobson, Cooley Philippa Bond, Proskauer Adam Ettinger, Sheppard, Mullin, Richter & Hampton Moderator: James Park, UCLA School of Law
Silicon Beach Acquisitions: Legal and Business Issues David Hernand, Paul Hastings
Brandon Quartararo, Intrepid Investment Bank
Andrew Erskine, Orrick
Moderator: Iman Anabtawi, UCLA School of Law
Digital and Beyond in South LA: The Future of Digital
Join Digital and Beyond in South LA for another not to be missed event at the Vision Theater in Leimert Park. They love to talk digital, but the strongest communities are made in person. Come out and support their efforts to build the tech and entrepreneurial community in South LA and bring attention and resources to this vibrant area. The program will consist of panels and fireside chats with the leading voices in LA’s tech and investment scene, partners to connect you with the resources you and your business need to succeed and presentations by local startups telling their stories and paving the way for future South LA entrepreneurs.
3341 West 43rd Place Los Angeles Digital and Beyond in LA will take place at the historic Vision Theatre Lobby in Leimert Park, which is conveniently located in the heart of Los Angeles in Leimert Park. Sign in at the registration desk and head step into the future of South LA.
Caroline Cherkassky is senior counsel of the Firm. Caroline’s practice focuses on advising emerging growth, development stage, and middle market companies on a variety of matters, including venture capital and other financings, employee compensation, securities laws compliance, technology transactions, corporate governance, and other general corporate matters. She also advises the funds and other investors that invest in these types of companies. Caroline received her B.A. in Economics from Stanford University and her J.D. from Stanford Law School. She is admitted to practice law in the State of California.
Stubbs Alderton & Markiles, LLP client Atomico announced today that it led the $64M investment round in Clutter with Sequoia Capital, Google Ventures (GV) and Fifth Wall. Clutter is an end-to-end storage company which takes the pain out of cataloging, packing, storing, and returning your items.
Clutter is a tech-enabled storage company that lets you store extra stuff without actually leaving your house. No more getting stuck in traffic just to put away your camping gear, or completely unpacking a storage unit in order to locate a box of family photos. With Clutter, all your stored items are ready to view online, and getting them out of storage is as easy as ordering a pizza. They believe a 5-star experience should be the norm, and that service companies should actually be of service to their customers.
Reps from Atomico stated, “At Atomico we invest in global opportunities where we know that we can help scale a business in specific markets around the world. Our thesis is that great companies now come from everywhere and so we’re always on the move, looking to find the most ambitious entrepreneurs, to help them execute their plans to improve the way we live. One of the places we’ve been spending time recently, and where we see clear momentum around the tech scene, is Los Angeles. And we believe we’ve unearthed a global category leader in LA-headquartered Clutter.”
Atomico invests in disruptive technology companies with ambitious founders from Series A onwards. Our experienced team includes founders and operators from the world’s most successful technology firms who partner with our companies as they scale to become global winners. Founded in 2006, Atomico has made over 80 investments into companies including Supercell, Klarna, Stripe, ofo, Lilium, 6Wunderkinder and The Climate Corporation. Atomico’s team includes founders of six billion dollar companies, and operational leaders who were responsible for global expansion, hiring, user growth and marketing at companies from Skype and Google to Uber, Facebook and Spotify.
About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment 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, videogame, apparel and medical device sectors. Our 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 our Firm.
Stubbs Alderton & Markiles’ client Consortia Health Holdings, Inc., a Personalized Pelvic Wellness health care company that provides clinically-relevant individualized diagnosis, therapy and education to help physicians treat their patients with incontinence, pelvic pain, sexual dysfunction and other pelvic disorders, today announced that it has closed a $2 million preferred round of financing. The round was led by Ponil Ventures, a current investor, and included Golden Seeds and Belle Michigan as new investors. The new financing will fund the growth needed to assist Consortia Health as they continue building the leading Pelvic Wellness Company.
To read the full article about Consortia Health click here.
About Consortia Health Consortia Health Holdings, Inc., is a personalized medicine company providing an integrated delivery model in partnership with physicians to provide diagnosis, treatment, and educational support to address pelvic floor disorders including urinary incontinence, pelvic pain and sexual health. Consortia Health is a leading provider of these services in the US and has been a trusted partner transforming patient lives. Consortia Health is focused on three strategic imperatives: becoming the worldwide leader in clinical continence services, expanding into the assisted living market and diversifying by offering a product portfolio while increasing revenue from international expansion. For more on how Consortia Health is making a difference, please visit the Company’s website at www.ConsortiaHealth.com.
Los Angeles, CA – Stubbs Alderton & Markiles, LLP one of Southern California’s top business law firms, has announced the promotion of two attorneys within its ranks.
Sean Greaney has been promoted to Partner, effective January 1, 2017. Sean’s practice focuses on corporate transactions, mergers and acquisitions, private equity transactions, and general corporate matters for both public and private clients, focusing on middle-market, emerging growth and development stage companies. In addition, Sean counsels companies in connection with company formation process, SEC reporting requirements and registrations, federal and state securities laws and compliance, corporate governance issues, joint ventures, employee incentive plans and executive employment agreements.
Caroline Cherkassky has been promoted to Senior Counsel, effective January 1, 2017. Caroline’s practice focuses on advising emerging growth, development stage, and middle market companies on a variety of matters, including venture capital and other financings, employee compensation, securities laws compliance, technology transactions, corporate governance, and other general corporate matters. She also advises the funds and other investors that invest in these types of companies.
Managing Partner Scott Alderton stated, “It is particularly gratifying to us when we promote from within. Both Sean and Caroline are very talented lawyers who have consistently demonstrated technical excellence and great client service. We are proud to welcome Sean into our Partnership and to recognize Caroline’s accomplishments with her promotion to Senior Counsel.”
For more information about Stubbs Alderton & Markiles, visit www.stubbsalderton.com or email firstname.lastname@example.org.
Stubbs Alderton & Markiles, LLP client Netki, Inc. closed a $3.6 million Series A financing, led by OATV III, LP, and including over a dozen prominent Angel and other early stage investors. Netki is a blockchain infrastructure company (facilitating cryptocurrencies and other blockchain-based technology applications), and has two initial products, Wallet Names and Travel Rule Certificates, that are based on open blockchain standards, and will facilitate ease of use, mass-market adoption and regulatory compliance of blockchain-based technologies.
Stubbs Alderton & Markiles, LLP announced today that it assisted client HelloTech with its $12.5 Series A Financing to expand their in-home tech support. The funding was led by Madrona Venture Group with participation from Upfront Ventures, CrossCut Ventures, and Accel Partners. HelloTech closed their $4.5M seed funding in February, bringing their total raise to $17M.
HelloTech is a new on-demand tech support service provided by our fully-vetted team of techs. Each HelloTech Hero is hand-selected, background-checked and completes a variety of tests and assessments. In addition to a complete range of tech support services, we also provide new technology consultation and training. We not only fix problems, we educate and help architect a home’s tech eco-system.
In today’s world of connected devices and the Internet of Things, our mission is to make the newest in technology available and understandable to all. We’re making technology in the home simple.