Stubbs Alderton & Markiles client Outstanding Foods, maker of PigOut Pigless Pork Rinds, announced it has closed a $5M round of financing led by SternAegis Ventures. Additionally, the plant-based brand welcomes LA Laker JaVale McGee to its impressive roster of celebrity investors. This additional capital will facilitate faster R&D, nationwide marketing, retail expansion, and team development.
To read the full press release visit here.
Stubbs Alderton & Markiles’ attorneys representing Outstanding Foods in this deal are Caroline Cherkassky and Andrew Sahn.
About Outstanding Foods
Built on the burning desire to make plant-based foods tasty as hell, Outstanding Foods creates foods for everyone without sacrificing taste or texture. Beginning with wholesome 100% plant-based ingredients, packed with protein and other health benefits, each product is skillfully prepared for superb taste and superior texture and is free from gluten, soy, GMOs, trans fats, and cholesterol. The brand also gives back, partnering with non-profits that help improve the well-being of farm animals, the environment, and the health of the communities it serves. Its newest product Outstanding's PigOut Pigless Pork Rinds are available direct to consumers at www.outstandingfoods.com and select retailers nationwide.
For more information about our Emerging Growth & Venture Capital Practice, contact Scott Alderton at or Louis Wharton at .
Stubbs Alderton & Markiles client, Morpheus Ventures co-led, with Alpha Edison, Drop's Series A funding round raising a total of $13.3 million. The round also had participation from Act Venture Capital. Drop, the leading smart kitchen platform, is ushering in a new era for home cooking, in partnership with the world's biggest appliance makers like Instant Brands, Kenwood, and Panasonic. Drop believes it can unify the fragmented cooking experience by integrating appliances of all kinds with a recipe app that makes perfect cooking simple. Steve Horowitz, partner at Alpha Edison, and Ray Musci, managing director at Morpheus Ventures, will also join Drop's board of directors.
"Consumers are looking for ease of use, less friction, and security," said Ray Musci, Managing Director at Morpheus Ventures. "The brands working with Drop drive engagement through a rich UX with data that informs better product development. Demonstrating value like that for both the consumer and manufacturer is how the connected kitchen will thrive."
To read the full press release visit here.
Stubbs Alderton & Markiles' attorneys representing Morpheus in this deal are Caroline Cherkassky and Brent Armitage.
About Morpheus Ventures
Morpheus Ventures invests in the disruption of large markets across the technology landscape from consumer to enterprise technologies including data analytics, machine learning, robotics, transportation, and SaaS. The firm is headquartered in Los Angeles and backs great entrepreneurs worldwide. For more information, see www.morpheus.com.
For more information about our Emerging Growth & Venture Capital Practice, contact Scott Alderton at or Louis Wharton at .
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Stubbs Alderton & Markiles, LLP client Atomico participated in MasterClass’s Series D funding round along with IVP, Javelin Ventures, NEA, Advancit Capital, and Evolution Media raising a total of $80M. This round of funding will be used to expand internationally and to bring more celebrities to MasterClass’s curriculum.
To read the full press release visit here.
Stubbs Alderton & Markiles attorney representing Atomico in this deal is Caroline Cherkassky.
About Atomico
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.
For more information about our Emerging Growth & Venture Capital Practice, contact Scott Alderton at or Louis Wharton at .
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Stubbs Alderton & Markiles client, CDTi, a leader in advanced emission control technology, announced the closing of its previously announced rights offering. At the closing, they issued and sold an aggregate of 4,427,563 shares of its common stock at the subscription price of $0.50 per share, pursuant to the exercise of subscriptions and oversubscriptions in the rights offering from its existing stockholders. CDTi received aggregate gross proceeds of approximately $2.2 million from the rights offering before deducting offering expenses.
Stubbs Alderton attorney representing CDTi Advanced Materials in this transaction was Louis Wharton.
About CDTi Advanced Materials
CDTi develops advanced materials technology for the emissions control market. CDTi’s proprietary technologies provide high-value sustainable solutions to reduce hazardous emissions, increase energy efficiency and lower the carbon intensity of on- and off-road combustion engine systems. With a continuing focus on innovation-driven commercialization and global expansion, CDTi’s breakthrough Powder-to-Coat (P2C™) technology exploits the Company’s high-performance, advanced low-platinum group metal (PGM) emission reduction catalysts. Key technology platforms include Synergized PGM (SPGM™) and Spinel™. For more information, please visit www.cdti.com.
For more information about our Public Securities practice, contact Louis Wharton at
Stubbs Alderton & 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 SA&M Managing Partner Scott Alderton as he chats about "How to Position Your Company for Financing." Scott is the Co-Chair of the Venture Capital & Emerging Growth practice at Stubbs Alderton, General Partner of SAM CREATV Ventures, and a thought leader in the startup financing space.
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Transcript
Heidi: Tell me a little bit about your practice and experience and what you love most about working with emerging growth companies?
Scott: Sure, I have been doing this for a long time. My practice is broad-ranging. Early on in my career, I was more of a corporate & securities lawyer doing traditional SEC type of work with larger companies. As this thing called the “Internet” began to develop in the '90s, it looked like it was interesting, I transitioned my practice to being more of a technology and venture capital lawyer. I really like working with companies all along their evolutionary path, but I really like working with early-stage companies. They have diverse, wide-ranging needs, they typically don’t have the resources that large companies have. I feel like I can play a vital role as an advisor even more-so than a lawyer. The lawyering part is the easy job to me, the advising part is really the fun part.
Heidi: Let’s talk a little bit about emerging growth companies and how they approach financing. What are some of the things an early stage company should be thinking about when they are going for funding. If they are really early, how do they attract investors?
Scott: I think it's really a couple of things. The first thing that every company needs to do is to decide what its vision is and what kind of company it's going to be. Venture capital is not right for every company and there’s lots of different ways to fund your businesses. The overwhelming majority of businesses do not get funded with venture capital. Venture capital is a way of financing a business through its growth stage. When it has a proven product, when it's found its market and when it now needs to scale and grow. That’s when venture capital comes in and helps a company do that, but to get to that point is challenging. First you need to decide; am I a company that is going to require venture capital and am I company that is going to address a large scaling market, be disruptive, grow to be very large? That’s a venture fundable business. Through the early stage, the second thing you need to figure out is - how am I going to get to the point where professional investors are going to be interested in me? Professional investors are not going to be interested in every company like I said they are going to be interested in companies where they can apply their capital, grow and scale the business.
Heidi: As far as some of the tips that you would give to them, for them to actually attract investors - where do they look for them? Are warm introductions the best thing? What are some of the tactics?
Scott: First of all, don’t look too early. Understand that if you are really going out and seeking traditional, professional investment that you are going to have to have some metrics. You’re going to have to have at least a MVP of a product, you’re going to find a market where that product is being accepted. You are growing and scaling a business in that market. Whether its users or customers - whatever it is - you have to get to that stage first. How do you get to that stage? Well, you get to that stage by raising money from friends and family, from people who know you. From people that are going to invest in you, because you’re the entrepreneur. They believe in you. Relatives, friends, strategic business partners. A second way to look at that is for people who ultimately will be interested in your product, even though you have no metrics or proof of your product today. They will invest in you because they want your product to hit the market. Might be a strategic investment. Figure out a way - come hook or crook- to raise that initial capital to where you can develop your product. Find a market place and the other doors will open.
Heidi: From a legal and business stand-point, how do they best position themselves?
Scott: Early stage companies by necessity cut corners, right? You don’t have resources. You’re boot strapping. You’re making promises that you can’t fully document. You can’t always afford lawyers or professional advisers and that’s fine. Do not second guess any of that. You got to where you are, but when you reach that point where you are now ready to go out and find professional capital, it's important to look internally first. That you look at yourself, do the same kind of diligence with yourself that an investor is going to do on you. That way there are no surprises. Figure out capital issues and fix them. Figure out your employment issues and fix them. Figure out your commercial contracts that you have done on a whim and fix them. So that investors don’t look at you and think good concept, but I am not going to take all this risk.
Heidi: There’s another topic that startups tend to think a lot about but aren't typically fully educated on - how should they approach valuation and dilution?
Scott: I think that people get hung up on valuation because they have some number set in their mind or they have some experience that they talk about with other entrepreneurs. They think they either have to hang on to a certain percentage of their business or it’s not appropriate to give a certain amount at a certain round. You have to come into a financial transaction with an open mind and understand not just what you’re selling and what you have to give up for that. Also, where you are going and where that money is going to take you? I see entrepreneurs being penny wise and a pound foolish all the time. They think they don’t want to be significantly diluted. They end up throwing a wrench in the negotiation or they loose a financing deal because they want to hang on to a few points of equity. In reality that money is going to take them so far that they are going to be vast and more valuable. Its a simple proposition of - there’s a pie and you want a piece of that pie. It's much better to own a smaller piece of a gigantic pie than it is to own a big piece of a small pie.
Heidi: Appreciate you for being here and I’m sure we will have you back for other topics some time soon.
Scott: Thanks, looking forward to it.
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To learn more about our Venture Capital & Emerging Growth Practice, contact Scott Alderton at .
Stubbs Alderton & Markiles client Colle Capital Partners, a global, opportunistic, early stage technology venture fund based in New York, with a presence in San Francisco, has closed its fund, after a strategic investment by Zain Group, a leading innovator of mobile communications in eight markets across the Middle East and Africa. Colle Capital Partners has a diversified technology focus with an emphasis on data in the Energy, Media, Telecommunications, Health IT, Security, and Software Development sector.
To read the full press release visit here.
Stubbs Alderton attorneys representing and acting as Fund Counsel to Colle Capital Partners are Scott Alderton and Jonathan Friedman.
About
Colle Capital Partners is a global, opportunistic, early-stage technology venture fund. Managers have completed deals in various verticals and across all capital structures. They pay special attention to data. Virtually all their deals have an intrinsic relationship with data as they believe that data will drive future growth for all their companies.
For more information about our Venture Capital and Emerging Growth Practice , contact Scott Alderton at
Stubbs Alderton & Markiles, LLP recently completed the formation of Colle Capital Partners I, L.P., a $20M global, opportunistic, early-stage technology venture fund. Managers have completed deals in various verticals and across all capital structures. They pay special attention to data. Virtually all of their deals have an intrinsic relationship with data as they believe that data will drive future growth for all of their companies.
SAM Partner Jonathan Friedman served as lead counsel in connection with the formation of the fund. For further information on SAM’s fund formation practice, please contact Jonathan Friedman at (818) 444-4514 or .
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.
SAM attorneys Scott Alderton and Caroline Cherkassky represented HelloTech in this transaction.
To view the TechCrunch article, click here.
For more information about our Venture Capital & Emerging Growth practice, contact Scott Alderton at or (818) 444-4501.
In a perfect world, a business lawyer isn’t the person you run to when things go sideways—it’s the trusted advisor you consult regularly to anticipate challenges and put you in the best position to succeed. While it may seem like a luxury for some startups, there are several important factors to consider that make hiring a lawyer earlier than later a smart decision.
Five Reasons to Hire a Lawyer for Your Startup
Guidance
At the incorporation stage, the value of a lawyer has as much to do with helping you figure out what you need as it does with preparing documents. When it comes to what kind of entity to form, how to structure and distribute equity, or the best strategy to protect your intellectual property, a good lawyer will help guide you toward where you need to be—and then get you there.
Ownership
When people embark on a business venture together, it’s best to establish everyone’s rights and expectations at the outset in case there are disagreements down the road. It’s a lot easier to resolve a conflict before it arises, and you’d never imagine anything could break the bond between you and your co-founders… until it does.
Intellectual Property
Intellectual property can be one of the biggest assets—and, if not protected, liabilities—of a startup company. Whether it means preparing nondisclosure agreements to protect trade secrets, drafting license agreements, defending trademarks, copyrights, or patents, or avoiding infringement of all of the above, a good lawyer will keep you protected.
Taxes
It probably goes without saying that you don’t want to violate tax laws or incur unnecessary tax liability, and that you want pay the taxes you owe so as to avoid penalties. Tax laws can be complex, and a good lawyer will keep you ahead of the curve on tax issues and structure your business accordingly.
Contracts
Finally, there’s the day-to-day legal that every startup encounters. Airtight vendor agreements, employment and contractor documents, and website terms of service and privacy policies are all invaluable for startups to get right—the first time.
Five Things to Look For When You Do
Expertise
First and foremost, you want someone that is skilled and experienced with the types of legal issues you will face. This includes both the underlying business issues and the challenges specific to your industry—an attorney with knowledge relevant to your business is best positioned to become the advisor you need.
For many startups across the board, it’s extremely advantageous to hire an attorney (and law firm) with experience in both formation and financing. An attorney who regularly helps companies get “up and running” but is also frequently involved in seed-stage and venture capital financing will be able to give you better advice, and better facilitate accomplishing your goals.
Fit
It’s also important that your lawyer (and his or her firm) is a good fit for your company. This means someone that you get along with and enjoy working with, but also someone who “gets” your business and industry and has the resources at their firm to serve all your potential needs. If a lawyer doesn’t speak the language of your business or understand the world in which you’re operating, it’s harder for him or her to adequately represent you.
Responsiveness
It should go without saying that you want a lawyer who responds to your calls and emails in a timely manner. What’s equally important is how they respond. A good lawyer shouldn’t just tell you “no.” They respond to a problem with the right questions and a new suggestion of how to get what you want: “This is what you can do.”
Connections
You might be thinking about your lawyer in terms of connections or cache, and you wouldn’t be alone in that thought. While the expertise, fit, and responsiveness of an attorney should take precedence, the ability of your lawyer to introduce you to investors or potential partners—as well as their guidance in how to do so and the credibility they lend—is simply part of the value proposition.
Fees
Let’s be honest: one of the biggest considerations in hiring a lawyer is the bottom line. The lawyers most start-ups deal with typically bill by the hour, and the hourly billing rate may vary widely between junior and senior lawyers. Depending on the complexity of your issue, the lawyer may be able to offer a flat fee arrangement to offer you some predictability, or at least offer an estimate of the amount of time it will take to complete the task at hand.
If you make the time and effort to find the right attorney and firm, you can get quality representation at a fair price. In the long run, hiring a lawyer for your startup is worth it—in time and money saved, and stress avoided, by starting down the best path in the beginning.
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Nick Feldman's practice focuses on corporate transactions, including mergers and acquisitions, dispositions, private equity transactions and general corporate matters for both public and private clients, focusing on middle-market and emerging growth companies. In addition, Nick counsels companies in connection with entity formation, corporate governance, federal and state securities laws and compliance, joint ventures, employee incentive plans, executive employment agreements and other executive compensation matters. Nick also serves as an Adjunct Professor at Loyola Marymount University, where he lectures on media law topics.
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For more information about services for your legal needs, contact Nick Feldman at or (818) 444-4541.
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 & Markiles Co-Founder and Managing Partner, Scott Alderton was featured in today's Entrepreneur.com article "Find an Attorney Who Will Be in Your Corner With These 3 Tips." Author Adam Callinan of Beachwood VC outlines some of the early questions you should be asking and warning signs you should be recognizing when searching for new legal counsel.
Scott Alderton states that you need “a lawyer with a deep contextual understanding of both the substantive nature of your evolutionary path (i.e. they understand and do the exact type of transactions you are going to be engaging in) and a broad understanding of your industry.”
To read the full article, click here.
For more information on our Emerging Growth practice, and for information about our Start-up Fixed Fee Legal Package, contact Scott Alderton at (818) 444-4501 or
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.