Although Japan is one of the leading countries in the world in terms of GDP, the success of its venture capital industry is questionable, especially when compared to that of the US. In Japan, there are about 1,500 venture capital deals annually, valued at $1.9 million per deal, whereas in the US, there are about…
Month: October 2013
This Isn’t What We Voted For: Will the JOBS Act Spur Fraud?
In an era of oversight, regulations are being reigned in to help startups obtain funding. The JOBS Act, signed into law in 2012, increases investment opportunities. Specifically, the Act permits “crowdfunding” through a provision allowing sales of certain unregistered securities in small amounts. Effective crowdfunding depends on a startup company’s ability to target the right…
The SEC’s Lift on the Ban on General Solicitation
On July 10, 2013, the Securities and Exchange Commission lifted an 80-year old ban on the general solicitation of private securities offerings to individual investors. The decision came as a response to Section 201(a) of the Jumpstart Our Business Startups (JOBS) Act of 2012, which amends Rule 506 of Regulation D under the Securities Act…
VC Firms and Non-Disclosure Agreements: A Changing Landscape
Traditionally venture capital (“VC”) firms looking to add potential portfolio companies have been unwilling to sign non-disclosure agreements (“NDAs”) during initial discussions with entrepreneurs about their technologies and execution strategies. This unwillingness from VC firms to sign NDAs stems from a number of reasons, “including a desire to avoid restricting their ability to seek out…
PE Firms Managing Tax Rates: Is the Management Fee Waiver Legal?
Private equity firms are no strangers to controversy when it comes to their compensation arrangements. In the most recent presidential election, Mitt Romney and the entire private equity industry came under intense scrutiny from both the electorate and politicians for the tax rate paid on carried interest. Carried interest is taxed at the capital gains…
Zombies of the Private Equity Industry Pt. I
Private equity funds have begun to slowly show the positive results of fundraising efforts – the capital raised in 2013 is up 20% compared to what was raised in the same period in 2012.1 Although the results of industry fundraising are improving, the amount of time needed to raise those funds is continuing to grow….
Shareholder Adviser Responds To Silicon Valley Governance
Oracle Corporation, like many Silicon Valley tech companies, makes no secret about wanting to do things differently.1 But their different approach to corporate governance is now getting an angry response. On Tuesday, October 8th, CtW Investment Group, which advises union sponsored pension funds and is a substantial shareholder of Oracle Corporation, issued a letter to…
Potential Change in Private Equity Manager’s Compensation Structure
Carried interest: “a share of any profits that the general partners of private equity and hedge funds receive as compensation, despite not contributing any initial funds. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund’s performance.”1 For private equity managers, this profit is usually taxed as…
General Solicitation and the New Wave of Private Securities Offerings
What makes a sale of securities a “private” offering as opposed to a “public” offering? The primary distinction is that firms who make public offerings seeking equity investors must register with the Securities and Exchange Commission (SEC). On the other hand, private securities offerings are defined as those that do not need to formally register…
Trends in Healthcare Investment
Historically, healthcare has been an attractive area for private equity investment due to strong returns and low default rates.1 In the future, it should remain attractive and continue to be a stable sector for investment. It is unlikely there will be any decrease in the demand for healthcare in the near future, especially with America’s…