Friends and Families Investing in Your Company – What Does it Take?

I came accross a very intersting post in the blog VentureBeat (http://entrepreneur.venturebeat.com/2010/01/11/ask-the-attorney-securities-laws/) and want to both recapitulate and opine a little.

The issue of family investing is an interesting one and the question at first is: can family and friends invest in a startup. The answer is yes, BUT the securities laws apply, and the best way to comply with them is to sell stock only to friends who are “accredited investors”.  Whenever a company offers or sells its securities – whether it be to founders, friends and family, angel investors, whomever – federal and state securities laws must be addressed. Like many laws, these are complex and not properly filing and complying with them has dire cosequences. Moreover, in light of the Madoff affair and other external pressures, the SEC and State securities law commissions are significantly stepping-up enforcement of the securities law

The basic rule is that a company may not offer or sell its securities unless the securities have been registered with the SEC and registered/qualified with applicable State securities commissions. Just having a company and a founders agreement in place does NOT qualify. Second there is a possibility for exemption from registration. The most common exemption used by start-up companies is the so-called “private placement” exemption. As the term implies, a private placement is a private offering to a small number of investors – like a few friends; however, there are different rules depending upon whether the investors are accredited or non-accredited.

In general, unless you really can’t get other funding, or conversely you think things are going well, keep friends and especially family out of the investment loop.

Filed under: Uncategorized, equity, investing, Start-Up

MA Senate Race and Implications for Biotech

And the race is on! New polls in MA give Republican Scott Brown the edge in the Senate race against Martha Coakley, which seriously jeopardizes the healthcare bill, because the 60-seat majority would go the way of the Dodo.

A provision in the healthcare reform bill stipulates 12 years of protected status for biologics, and there is broad bipartisan support for it. A bill that includes such a provision is virtually a dream scenario for the biotech industry, which had faced calls for a much shorter length of protection (5 years if memory serves) from leading lawmakers like Waxman (D-CA).

If reform goes through now despite the problems, and that’s a big if, because the house would be passing the Senate bill which had gotten a lot more bad press than the house version, biotech could getswhat it has wanted all along. If reform founders, that very expensive debate could start all over again.

Filed under: Uncategorized, biotech, healthcare, MA, senate

Genzyme hires new QC Exec (finally

About time I say!

From ABC news: http://abcnews.go.com/Business/wireStory?id=9512210

Filed under: Uncategorized

Things to look out for in BioPharma in 2010

1. Biosimilar legislation (7 years, 12 years, more, less?)
2. Start-up funding up or steady, i.e. low.
3. Genzyme saga – how long is the CEO going to stay.
4. Is the acquisition trend by pharma RE: small biotechs holding or subsiding?

What are you thinking – other things to watch for.

Filed under: Uncategorized