Articles Tagged with Fundraising

Initial Coin Offerings (ICOs) have recently become a popular new source of funding for Silicon Valley businesses. They are new and exciting, but they can also be risky. It is important for business owners considering an ICO to understand both blockchain processes and the securities laws which apply to digital currencies. The experienced corporate attorneys at Structure Law Group can help your business enter this emerging market cautiously in order to explore the many exciting possibilities it holds.

An ICO is a method of funding a new (or even established) company by selling its own form of cryptocurrency. The company may accept traditional payments or even other forms of cryptocurrency. This financing is then used to fund the company’s operations. Its new cryptocurrency gains value, and this allows many of the initial investments to appreciate.

While the goals of an ICO are the same as those of an initial public offering, the process has some critical differences. IPOs are heavily regulated by the Securities and Exchange Commission. Investors are left with stock and voting rights which are clearly defined, and the entire process is underwritten by an investment bank. By contrast: an ICO has no underwriter, no equity or voting rights, and little regulation by the SEC. (The SEC is quickly adapting to this emerging market, and the regulatory landscape is likely to change drastically in the near future.) Interestingly, many ICOs involve new companies with little or no proven track record of financial success. Many do not even have products. All of these factors can make ICOs highly risky for investors.

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There are many ways for San Jose technology companies to obtain startup financing and fundraising. One way in which private financing and fundraising can be accomplished is through convertible notes, and may or may not require the involvement of traditional venture capital firms. Convertible notes can allow startup companies to determine the amount of control that their investors will have over the management of their company during the initial startup phase. The experienced San Jose corporate attorneys at Structure Law Group can help your startup explore all financing options to advise on which are best for your business.

A convertible note is a form of short-term debt that converts to equity at a specified point in the future. For startup companies, this is most often accomplished by converting an investor’s initial investment into a given number of shares in the company, at a specified round of financing. The equity does not need to be expressed in shares of common stock, nor does it even have to occur during the first round of financing. The note’s terms and conditions can be negotiated to meet the needs of both the startup company and its investor(s).

Other Negotiable Terms of a Convertible Note

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