Tag Archives: Stubbs Alderton

Stubbs Alderton & Markiles Represents Client Platinum Equity in Sale of Keen Transport to Wallenius Wilhelemsen Logistics ASA

LOS ANGELES, Dec. 12, 2017 (NEWSWIRE) – Stubbs Alderton & Markiles, LLP announced today that it represented Platinum Equity in its sale of Keen Transport to Wallenius Wilhelmsen Logistics ASA (WWL).  Financial terms of the transaction were not disclosed. The deal was led by Partner Marc Kenny and associate Nick Feldman assisted in the transaction.

 Keen Transport is a national provider of heavy-haul logistics and transportation services for the construction, mining and agriculture equipment markets. WWL, based in Oslo, Norway, is a global logistics operator serving the manufacturing industry with special focus on vehicles, mining and construction equipment and machinery. Founded in 1995 by Tom Gores, Platinum Equity is a global investment firm with $13 billion of assets under management and a portfolio of approximately 30 operating companies that serve customers around the world. The firm is currently investing from Platinum Equity Capital Partners IV, a $6.5 billion global buyout fund.  

To view the full press release, click here

 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. Stubbs Alderton’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.

 For more information about the Mergers & Acquisitions practice at Stubbs Alderton & Markiles, contact Marc Kenny at mkenny@stubbsalderton.com

 Press Contact:

Heidi Hubbeling
Director of Marketing
hhubbeling@stubbsalderton.com

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SAM Client Alert – Deadline Approaching: Register Your DMCA Agent by End of the Year – U.S. Copyright Office Changes the DMCA Agent Registration Process

Image result for DMCABy December 31, 2017, any online service provider that has registered an agent with the U.S. Copyright Office through the paper-based registration system must submit a new registration using the new electronic system to preserve safe harbor protection under the Digital Millennium Copyright Act (“DMCA”).

The DMCA, among other things, provides a safe harbor for online service providers from copyright infringement liability resulting from content posted on their websites or services by users. To qualify for DMCA safe harbor protection, online service providers must designate an agent to receive notifications of alleged copyright infringement by registering with the Copyright Office and each service provider must list their agent’s contact information on their website.

The Copyright Office’s paper-based registration system has been replaced by an online registration system. All online service providers seeking DMCA safe harbor protection must now register agents using the new electronic registration system. This applies to online service providers that have already designated DMCA agents using the paper-based system.

Online service providers that previously designated a DMCA agent using the paper-based system must resubmit their designations through the new electronic system before the December 31 deadline and renew their designations using this system at least every three years. Failure to register electronically by the end of the year will result in the expiration of existing designations and the loss of DMCA safe harbor protection.

What should online service providers do? All online service providers should submit a new DMCA agent designation using the online registration on the DMCA website by December 31, 2017. The fee for filing, amending or renewing a designation through the online system is $6.00.

How Stubbs Alderton & Markiles, LLP can help. We are a full-service law firm with expertise in intellectual property and technology law. We can help register your DMCA agent designation with the Copyright Office using the new electronic system.

For more information about this or other intellectual property issues, contact SAM Partner Kevin DeBré at kdebre@stubbsalderton.com 

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SAM Client ICPW Liquidation Corporation, f/k/a Ironclad Performance Wear Corporation, Acquired by Brighton Best International

Ironclad Stubbs Alderton & Markiles client ICPW Liquidation Corporation, f/k/a Ironclad Performance Wear Corporation (OTCBB: ICPW), a maker of high-performance and task-specific PPE gloves, has announced that it has been acquired through an Asset purchase by Brighton Best International, Inc.

To read the full press release visit here.

Stubbs Alderton & Markiles, LLP attorneys representing ICPW Liquidation Corporation in this transaction were Louis Wharton, Scott Alderton, Kelly Laffey and Grace Kim.

About Ironclad

Originally founded in 1998 in El Segundo – California, IRONCLAD is today headquartered in Farmers Branch, Texas and is the industry leader in high quality task-specific PPE gloves. IRONCLAD continues to leverage its leadership position in the safety, construction and industrial markets through the design, development and distribution of specialized task-specific gloves for industries such as oil & gas extraction; automotive; police, fire, first-responder and military and more. Ironclad engineers and manufactures its products with a focus on innovation, design, advanced material science, dexterity and durability. Ironclad’s gloves are available through industrial suppliers, hardware stores, home centers, lumber yards, automotive stores and sporting goods retailers nationwide; and through authorized distributors around the world. Built Tough for the Industrial Athlete™.  To learn more and see more, visit: www.ironclad.com

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. Stubbs Alderton’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.

For more information on our Mergers & Acquisitions and Public Securities practices, contact Louis Wharton at lwharton@stubbsalderton.com.

 

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Preccelerator® Program Announces Its Eighth Class of Companies

​The Preccelerator® Program, a Santa Monica, California-based accelerator program for early- stage startup companies in the digital media and technology space, announced today that it has added its eighth class of companies featuring four innovative startups.

In 2012 Stubbs Alderton & Markiles launched the first-of-its- kind Preccelerator® Program to provide select start-ups with co-working space, mentorship, sophisticated legal services, curriculum and access to a strategic perks portfolio with the objective of helping grow a founder’s idea from business concept to a funded company. Over the past five years, 34 companies have graduated the Program, of which 20 have received funding totaling over $9M.

Preccelerator® Program Class 8 companies include:

Boomer Returns – Boomer is an ecommerce return platform that brings returns to your front door. The company’s goal is to eliminate the pain points in the return process where they hurt online shoppers the most. If you need clothing or accessories returned, you no longer have to leave your home. Instead, you can use Boomer and a reliable person will be at your door within an hour to handle your returns for you. The company is founded by Pat Bauer and Ben Grabow.

Best Food Trucks – Best Food Trucks (BFT) is the largest food truck platform in the U.S., with over 500 trucks booking lots nationwide. BFT is reinventing the office lunch experience, by providing business parks & office buildings with all the logistics of setting up food trucks, booking, and (coming soon) the ability to skip the line and order ahead from your phone. The company is founded by Matt Geller and Kevin Davis.

Lumenus – Lumenus is an IoT safety company, building a Hardware/Software platform using the Internet of Things to provide real-time safety alerts and create actionable insights for both consumers (bike/run/motorcycle) as well as industrial usage (high-risk vocational workers). They license their technology out to existing companies to scale the operation across industries and use-cases. They are currently in production with Timbuk2 on a backpack ‘Powered by Lumenus’ launching Spring 2018. The company is founded by Jeremy Wall.

BluAtom VR – BluAtom VR is a provider of a next-generation motion and haptic game controllers for virtual and augmented reality entertainment and training applications — It effectively turns any player’s body into a game controller. The BluAtom system comes with a wireless motion vest, hand controller and network hub to detect as well as enhance the user’s movements for a more natural and immersive virtual reality experience. The system is plug and play, no special device driver is required. The BluAtom VR founding team are Steve KearsleyDean ShipleyFarzad AhmadkhanlouSean Sharifian, and Mark Thimmig and Sean Lee.

For more information about the Preccelerator® Program, visit www.preccelerator.com.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton & Markiles, LLP is a Southern California-based 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 a broad range of industries with a concentration in the technology, entertainment, videogame, apparel 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. For more information, visit http://stubbsalderton.com.

About the Preccelerator® Program

The Preccelerator® is a novel platform offered to select start-up companies out of the Stubbs Alderton & Markiles, LLP Santa Monica office that provides interim office space, sophisticated legal services, education,  networking, mentorship and $250,000 in usable perks from Google Cloud for Startups, Amazon Web Services, and HubSpot among others, with the objective of helping grow a founder’s idea from business concept to funded startup. The program also retains more than 50 active strategic mentors providing free office hours and discounted services, and provides over 50-plus educational workshops and networking events each year. The Program expanded in 2017 to accept a greater number of companies in more formalized classes, depending upon where the companies are in their evolutionary growth, expand benefits to accepted companies, and will look to make strategic investments backed by strategic angel investors. To apply to the Preccelerator, visit www.preccelerator.com/application.

Contact:

Heidi Hubbeling
Chief Operating Officer, Preccelerator® Program
hhubbeling@stubbsalderton.com
310-746-9803

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SAM Preccelerator® Company nēdl Named Finalist in PILOT Innovation Challenge

nēdlSAM Preccelerator Company nēdl, an app that allows radio listeners to use speech recognition to eliminate the need to go station-to-station to find specific news, sports, talk and music, has been named among the 12 finalists for the PILOT Innovation Challenge. PILOT is an innovation initiative of the National Association of Broadcasters (NAB). The PILOT Innovation Challenge recognizes creative ideas that leverage technological advances in the production, distribution and display of engaging content.

To read the full press release visit here.

About nēdl  
nēdl
 uses proprietary Speech Recognition to let you search within 100,000+ live news, sports, talk, and music broadcast streams to find what you want and listen to the stream or add your unique voice to the global real-time database for instant discovery. Visit www.findnedl.com

To learn more about the Preccelerator® Program, contact Heidi Hubbeling, COO at (310) 746-9803 or hhubbeling@stubbsalderton.com

 

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Introducing the Startup Superhero Video Series! – This Week Featuring Scott Alderton on “Positioning Your Company For Financing”

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 salderton@stubbsalderton.com.

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Major Legal Pitfalls for Startups – The Case for Hiring a Lawyer before you “Start Up” – Part 2

 

In this two part series, Kelly Laffey discusses the legal pitfalls that startups can avoid when forming their company. Kelly counsels clients on issues related to corporate governance, mergers and acquisitions matters, and securities regulation and compliance. She also assists with financing for large private corporations, and entity formation and succession planning for professional services firms. Kelly provides general business counseling on a variety of up-and-coming regulatory issues for small and emerging companies that offer commercial services, allowing them to explore new business opportunities in various states. Drawing on her diverse work experience in the entertainment arena, including time spent with talent agencies, and music and television production companies, Kelly also assists on matters related to licensing, marketing, and exploitation of intellectual property rights.

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In Part 1 of this series, I described some typical legal problems that startup companies face when they try to go it alone in the early stages of their business related to choice of entity form and jurisdiction and common issues that arise with respect to division of equity.  In this part 2, I discuss issues related to securities laws and intellectual property and finally offer some words of advice regarding how to manage the costs of hiring an attorney early on.

Compliance with Securities Laws

Any issuance of securities, meaning stock, LLC interests, options, warrants, convertible notes, convertible securities (or SAFEs) and more, will be subject to federal and state securities laws.  Startup companies often need to find an exemption to the registration requirements of federal securities laws until they are ready to go public.  Securities law is a large and complex subject that really requires a good corporate attorney to help explain those obligations relevant to a particular company in a particular given circumstance.  Failure to comply with securities laws can result in a huge financial burden on the company, the founders and recipients of equity, including employees and investors, when fines are imposed or the recipients are forced to pay a much higher price for the equity than what was intended.  An experienced securities practitioner can help you find the right exemption and implement the right process to avoid fines and adverse consequences.

Protecting Your Intellectual Property and Employment Issues

It is critical to have proper employment documentation in place and such documentation should properly protect the company’s intellectual property.  Typical employment agreements include “at-will” offer letters, independent contractor agreements, consultant or advisor agreements and stock incentive award documents.  Employment laws vary from state to state so depending on what state you’re in, you may need to include specific provisions to comply with applicable state law. One of the most important employment documents which every employee (including co-founders) should sign is a proprietary or confidential information and inventions assignment agreement.  This document ensures the company’s confidential information will remain confidential and that any ideas, work product or deliverables created by the company’s employees while working for the company will be owned by the company.  These agreements generally prevent key employees who have developed significant intellectual property for the company from claiming rights in such intellectual property in the event that they leave.

Trying To Do It Yourself

For the reasons stated above and many more, one of the biggest mistakes a company can make is trying to do the legal formation work on their own or with an inexperienced legal service provider.  All of the mistakes described above are correctable but correcting them takes time and can incur greater cost than getting professional advice from the beginning.  Many firms have very reasonable startup packages for early stage companies that include both forming the company properly and providing a suite of documents covering most, if not all, of the above issues for the company’s use, for a very reasonable flat fee.  These packages are designed to get the company started and provide you with the basic forms of agreements you need to be protected.  Once these are put in place, the company is unlikely to incur significant legal costs until it raises capital or undergoes another significant event.  While a startup package fee may still seem like a significant amount of money to spend in a company’s early stages, the value is immeasurable over the life and success of the business.

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For more information about Startup Formation and other emerging growth issues, contact Kelly Laffey at klaffey@stubbsalderton.com.

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SAM Preccelerator Alumni Tina Hay of Napkin Finance Featured Speaker at “Hypothesis Driven Management”

Women In LAVA and Pivotal Labs are excited to announce
a joint strategy-focused event on October 24, 2017 :

“Hypothesis Driven Management: Learn how to reduce risk
and create the product customers want.”

This is a hands on, experiential session which will take you through the initial stages of assessing the next steps for your company and potential product launch.

Event details:
Monday, October 24, 2017
6-8:30pm

Pivotal Labs
1333 2nd St., Suite 200
Santa Monica, CA 90401

Here’s a brief description of what you will experience:

Workshop Objectives and Agenda:

Building new products will always be challenging and never without risk. However, the processes for creating the right solution, increasing market fit and reducing time to market have evolved significantly over the last decade.

Learn how to:

  • Identify your biggest risk
  • Create an approach for reducing that risk
  • Leverage your customers to test your new approach
  • Generate better insights about your user that will inform all future development

You will work along side two successful entrepreneurs: Jennifer Beall Saxton, CEO of Totsquad and Tina Hay, CEO of Napkin Finance, who will share their experiences as they built their companies and made essential pivots along the way.

Tina Hay

Napkin Finance is a multimedia company that grew out of our own needs for a better way to learn and understand finance.
We developed our platform as a quick and easy resource on everything you need to know about money in 30 seconds or less. Our mission is to empower our readers to manage their money and understand basic financial concepts in a simple, fun and engaging way. In addition to Napkins, we have grown into a wide range of products and features including: Videos, Life Events, NapkinGrams, and Podcasts. Most importantly, Napkin Finance has become a community of ideas and concepts that has empowered our readers to fully understand the complexity of personal finance. Money isn’t boring and educating yourself about it shouldn’t be either!

For more about the Preccelerator® Program or to apply,  contact Heidi Hubbeling, COO at (310) 746-9803 or hhubbeling@stubbsalderton.com

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Major Legal Pitfalls for Startups – The Case for Hiring a Lawyer before you “Start Up” – Part 1

 

In this two part series, Kelly Laffey discusses the legal pitfalls that startups can avoid when forming their company. Kelly counsels clients on issues related to corporate governance, mergers and acquisitions matters, and securities regulation and compliance. She also assists with financing for large private corporations, and entity formation and succession planning for professional services firms. Kelly provides general business counseling on a variety of up-and-coming regulatory issues for small and emerging companies that offer commercial services, allowing them to explore new business opportunities in various states. Drawing on her diverse work experience in the entertainment arena, including time spent with talent agencies, and music and television production companies, Kelly also assists on matters related to licensing, marketing, and exploitation of intellectual property rights.

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In my practice as a corporate attorney, I work primarily with startup and emerging growth companies.  This article may read similar to an advertisement for legal services and there may be some truth to that.  My ultimate goal as an attorney, however, is to save startup companies time and money (and stress) in the long run by doing things right from the start which will allow the company to put more resources to work on growing the business rather than fixing mistakes that could have easily been avoided.

Attorneys are often brought it in to work with clients who have done a significant amount of the formation and organization work themselves or through an online legal service provider at a low cost.  While it is certainly understandable that a very early stage company does not want to incur more legal cost than it has to, what seem like very minor issues to founder can lead to a lot of unnecessary clean-up work and time spent determining the best way to fix those issues including if and how to disclose them to potential investors, strategic partners or others that are critical to the business.

The unfortunate fact is that errors in company formation usually come to light when a company is about to engage in its first major financing or strategic transaction and potential investors or strategic partners start doing their “due diligence” on the company, i.e., looking into its formation documents, the founder agreements, employment agreements, etc.  This is often a critical time for the company as the founders have begun conversations with potential investors or a strategic partner, built momentum and are usually geared to start scaling the business. When the problem areas are identified and those activities are put on hold, it can cause a panic at the company, requiring lawyers to address the errors on a tight timeline in order to minimize the damage and not lose momentum. The result is typically a very high legal bill for a financing or strategic transaction.

In this two-part series, I describe some common legal issues encountered by startups that are not properly considered without legal counsel and which, when thoughtfully discussed with legal counsel prior to forming the company, should spare the company from legal expenses for corrective measures.

Choosing the right entity AND the right jurisdiction for you.

One of the first decisions a new company has to make is what legal entity form to take.  There are without a doubt dozens of articles that say you should be a C-corp for these reasons or you should be an LLC for those reasons.  Maybe you’ve read or know something about S-corps and you think that sounds like a good idea.  The reality is that the right entity form for your company is very specific to the facts and circumstances of your company.  Factors we consider include, among others: How many founders are there? How many employees will the company have? Will the company raise money from VCs or angels (and if so, does it expect to do so right away or will that be much further in the future of the company)? What is the anticipated size of the business? In what industry does the business operate? What might make the most sense now might not serve as the best form later and the form of entity can generally be changed later if necessary.  These are all factors a good lawyer or tax advisor can talk through with a new business and provide guidance regarding which options to select based on the company’s business plans.

The less often thought about issue is where to form the company.  As a lawyer practicing in what’s been termed “Silicon Beach,” most of our clients are based in California and so many assume they should organize or incorporate in California.  For some companies, being formed in California is perfectly fine, however, California can also be problematic for a number of reasons.  Many outside investors do not like to invest in California entities because California does not have the established corporate jurisprudence that Delaware has and so there is an element of unpredictability in California.  Companies will often be advised to incorporate in Delaware because Delaware corporate law is seen as both business and investor friendly.  However, if a company incorporates in Delaware, it has to engage a registered agent located in Delaware and so for some companies, it does not always make sense to pay the registered agent fees. Other factors to consider when choosing a jurisdiction are filing fees, franchise taxes and required annual filings. These are all considerations a corporate lawyer can help startups navigate.

Division of Ownership; Dilution and Vesting.

This can be an awkward conversation amongst founders but it is an important conversation to have early on in the life of the business.  How much of the company should each founder own? What is each founder bringing to the company in terms of skills, resources and service and how do we value what each founder adds? How much dilution are the founders willing to endure and from which sources, i.e., outside investors, an employee option or stock pool, venture debt transactions, etc.? Should the equity be subject to vesting and continued service to the company?

I’ve often encountered very early stage clients who have 2 to 3 initial founders and they have already diluted themselves by giving away equity such that together, they own less than half of the company.  Founders are so passionate and focused on developing the idea and growing the business, they don’t necessarily have good insight when it comes to managing the cap table.  Further, I’ve seen companies provide equity grants to service providers or intended partners of the business without subjecting the grants to vesting or continued service to the company over time.  We typically recommend that all service-related equity vest over a certain number of years to ensure the company is getting the intended value in exchange for that equity.

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For more information about Startup Formation and other emerging growth issues, contact Kelly Laffey at klaffey@stubbsalderton.com.  Stay tuned for Part II of the Startup Pitfalls Series on Monday, October 16th.

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SAM Partner Michael Sherman Successfully Represents Danny Wimmer Presents

Danny WimmerStubbs Alderton & Markiles Partner Michael Sherman was lead counsel to Danny Wimmer Presents in its successful legal battle against its former law firm disputing their 14.3 percent membership claim to the company DWP. Danny Wimmer Presents is a music festival production and promotion company that is headquartered in Los Angeles.

L.A. Superior Court Judge Elizabeth White ruled that the operating agreement between the law firm and DWP covered only the single Welcome to Rockville event, noting Davis Shapiro was repaid its investment plus profit share, and never reinvested.

Stubbs Alderton & Markiles attorneys representing Danny Wimmer Presents are Michael A. Sherman and David Harris.

Michael ShermanMichael Sherman  is an accomplished trial lawyer in high-stakes, “bet-the-company” litigation, and has represented both large and early-stage companies as well as entrepreneurs in all facets of business and complex commercial litigation. He has evenly split his litigation practice on both the plaintiff and defense side of cases, has first-chaired numerous trials in complex matters in industries as varied as energy, securities, healthcare, environmental, consumer products, technology, project development/finance, advertising, real estate and apparel, and is highly skilled in class actions and unfair competition law.

For more information on our Business Litigation Practice, contact Michael A. Sherman at msherman@stubbsalderton.com.

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