Our Committee's Spring Meeting will be held from April 22 - 24, 2010 in Denver, Colorado. We hope to see many of you there. With the meeting approaching fast, I'd like to share some exciting Committee updates and highlight our offerings at the Spring Meeting. Before getting to that, one more enormous thank you to Samantha Horn for a wonderful job as chair of our Committee over the past three years!

As many of you know, the leadership of most of our subcommittees has changed as well. Our Committee and our new and returning subcommittee chairs have a lot planned, including substantive meetings and new and ongoing initiatives. While we hope to see you in person at our meetings, you don't have to attend to get involved and get the most of your membership. Just reach out to me or any of our subcommittee chairs!

Here are a few items to have on your radar for the Spring meeting and beyond (for our complete agenda and schedule, click here):

• Substantive Meetings and Programs. Our subcommittees focused on substantive topics will be holding subcommittee meetings at the Spring Meeting and our future meetings. These subcommittee meetings will include compelling discussion and updates on emerging issues and work on ongoing and new projects. Don't miss the meetings of our International Subcommittee (chaired by Samantha Horn, Sajai Singh and Francesco Portolano), our newly invigorated Angel Venture Capital Subcommittee (chaired by Yoichiro ("Yokum") Taku), and our Venture Capital Transactional Issues & Documents Subcommittee (chaired by Herbert Fockler). At future meetings, also look for our new Private Equity and Venture Capital Funds Committee (chaired by Vicki L. Martin-Odette) to be offering timely content.
  
  We're sponsoring two CLE Programs: Financing the Emerging Growth Company, on Thursday, April 22 from 1:30 - 2:45 PM, and Secondary Markets for Venture Capital and Private Equity Investments, on Saturday, April 24 from 8:00 - 10:00 AM. Both programs will feature industry leaders sharing their views on these topics.
  
  Of course, we'll also be meeting as a full Committee on Friday, April 23 from 3:00 - 4:30 PM. The agenda for our Committee meeting will include discussion and presentations on current topics of interest, an overview of the Denver/Boulder area VC and PE community by a local member of that community, updates and reports from our subcommittees and the usual informal roundtable discussion.
  
  
• New and Ongoing Initiatives.
  • Under Herb's leadership, the Venture Capital Transactional Issues & Documents Subcommittee continues its work on commentary to a charter for a venture-backed company.
  • Eric Koester has taken over as Editor of Preferred Returns and is bringing new energy and new ideas to our flag publication and our website, as well as exploring using technology and web-based tools for us to create and share new content.
  • Yokum has invigorated our Angel Venture Capital Subcommittee, and will be exploring a signature project for that group.
  • Samantha, Sajai and Francesco are continuing our Committee's tradition of diverse, international participation.
  • Finally, Vicki, as the chair of our new Private Equity and Venture Capital Funds Committee, will no doubt be building an interesting agenda as that subcommittee ramps up.

If you're in Denver for the Spring Meeting, please don't forget to join us at our Wine Tasting on Saturday, April 24 from 6 - 7:30 PM. The Wine Tasting will be held at Cru Wine Bar - it will be a fun and easy opportunity to get together before heading out for the evening.

Warm regards,

Mark Danzi
Hill Ward Henderson
Tampa, Florida
813.227.8484
mdanzi@hwhlaw.com

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Private equity and, to a lesser extent, venture capital firms have become increasingly comfortable with investing in portfolio companies that are organized as flow-through tax entities, such as limited liability companies ("LLCs"). The principal reason for this is that LLCs and other entities that are treated as partnerships for tax purposes can enhance the returns and the timing of returns for investors.


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Jason Mendelson is a Managing Director of the Foundry Group, a venture capital firm focused on making investments in early-stage information technology, Internet and software startups. Foundry is located in Boulder, CO and makes both small seed investments and participates in traditional venture financing rounds.

Jason helped found and launch Foundry with the other three principals in 2007. As one of the first full-time, in-house general counsels at a venture capital firm (from his time at Mobius Venture Capital), Jason has been on the forefront of thought leadership and has co-chaired the National Venture Capital Association's General Counsel group and is an active participant on the NVCA's Chief Financial Officer group. He was one of the key draftspersons for the NVCA model document task force which created the industry's first set of standardized venture capital financing documents, which has greatly aided in the efficiency of completing these types of deals.

In this article, we asked Jason questions about the role of lawyers in the venture capital investment process, how lawyers can better assist entrepreneurs and VCs, about the Colorado investment and innovation economy, and more about the Startup Visa legislation that Foundry and its partners have helped to champion.


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The Startup Visa Act of 2010, introduced in February 2010 by Senator John Kerry (D-MA) and Richard Lugar (R-IN), would modify the existing EB-5 visa to enable job-creating entrepreneurs to immigrate to the United States. The bill requires each entrepreneur to have a sponsoring US venture capital or angel investor who will invest at least $100,000 in their startup, and total funds raised must be at least $250,000 per company. The legislation is supported by more than 150 venture capitalists and investors who signed a letter urging its passage. While in DC, the group will be meeting with members of Congress, The White House, Commerce Department, State Department and Small Business Administration, and bringing thousands of messages from voters around the country who support the bill. The grass-roots effort to create the bill began last year, prompted by a blog post by Paul Graham of venture capital firm Y Combinator. Brad Feld, a venture capitalist with Foundry Group based in Colorado, took the next step and began promoting the idea on his website and blog. McClure and Silicon Valley entrepreneurs Eric Ries and Shervin Pishevar then joined the effort by creating the StartupVisa.com website after a previous trip to DC by Silicon Valley geeks in September, and producing a video featuring Ries and Canadian entrepreneur Eric Diep, who had been unable to get a visa to start his company in the US. Feld worked together with congressman Jared Polis (D-CO) to draft legislation introduced in the House last fall, and was later joined by Kerry and Lugar in introducing similar legislation in the Senate. This report tells more about the Startup Visa.

To date, more than 150 venture capitalists have signed a letter supporting the passage of the bill. Click here to read the letter.

For more information on the Startup Visa and to track news about the project, visit the Startup Visa website here.


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Fenwick & West analyzed the terms of venture financings for 112 companies headquartered in Silicon Valley that reported raising money in the fourth quarter of 2009.

Highlights of the report include:

• Up rounds exceeded down rounds in 4Q09 47% to 30%, with 23% of rounds flat. This was an improvement over 3Q09 when up rounds exceeded down rounds 41% to 36%, with 23% flat. This was also the second quarter in a row in which up rounds exceeded down rounds. The improvement in 4Q09 was driven primarily by financings of internet/digital media companies, and software companies (which includes SaaS companies), which had 60% and 65% up rounds, respectively.
  
  
• The Fenwick & West Venture Capital Barometer(tm) showed an average price increase of 19% in 4Q09, compared to 11% in 3Q09. This was the second quarter in a row in which the Barometer was positive. We note that the Barometer would have been up only 12% in 4Q09 except for one financing that sold stock at a very significant increase to its prior round.

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Cooley Godward Kronish LLP's 2009 report on venture capital financing market terms analyzes Cooley's venture capital transactions nationwide that closed during the fourth quarter of 2009, with comparisons to the first three quarters of 2009 and prior years. The analysis is based on 376 completed deals across the United States totaling approximately $3.82 billion during 2009, including 98 completed deals totaling approximately $1.1 billion during the fourth quarter.

Highlights from the fourth quarter of 2009 include:

• The percentage of up rounds in the fourth quarter (45 percent) saw a considerable increase compared to the first three quarters (26 percent)
  
  
• The percentage of down or flat rounds continues to outpace the number of up rounds
  
  
• While still below recent historical annual averages, fourth quarter median pre-money valuations increased for all series as compared to the prior three quarters of 2009
  
  

"The increases in the number of deals, average pre-money valuations and aggregate dollars raised in the fourth quarter point to a potentially improving landscape for venture financing deals," said Craig Jacoby, head of Cooley's Emerging Companies practice.


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• Clean Tech Opportunities for the Entrepreneur: Navigating the Legal Issues -
  Thursday, April 22, 2010, 10:30 AM - 12:30 PM
  
  
• Financing the Emerging Growth Company -
  Thursday, April 22, 2010, 1:30 PM - 2:45 PM
  This program will focus on the basics of representing an emerging growth company in an equity or equity-like financing transaction, with a principal focus on key aspects of negotiating and structuring venture capital transactions. The program will also touch on angel financings and evolving alternative financing sources for emerging companies. A panel of experienced venture capital and start-up company lawyers will discuss the structure of these transactions, key negotiating terms and other basic legal issues lawyers need to understand. An experienced entrepreneur and venture capitalist will share their real world perspectives on the legal aspects of these transactions, the terms they have found most meaningful and key business issues lawyers need to recognize.
  
  
  
• Secondary Markets for Venture Capital and Private Equity Investments -
  Saturday, April 24, 2010, 8:00 AM - 10:00 AM
  Presented by: Private Equity and Venture Capital Committee Chair and Moderator: Paul 'Chip' Lazard Lion, III, Partner, Morrison & Foerster LLP, Palo Alto, CA
  
  Speakers:
  Greg Brogger, CEO, SharesPost, Santa Monica, CA
  Bo Brustkern, Founder & Managing Director, Arcstone Partners, Inc., Denver, CO
  Stacey Doynow, Assistant General Counsel, SecondMarket, Inc., New York, NY
  M. Adam Oliveri, Managing Director, Private Company Market, SecondMarket, New York, NY
  With the dearth of IPOs and attractive M&A opportunities, venture backed companies are staying private longer than before. More shareholders of these companies desire interim liquidity. This program will explore the secondary market solutions currently available to private company shareholders as well as the regulatory, legal, and practical hurdles to any secondary sale.
  
  
  
• Private Equity M&A (sponsored by Mergers & Acquisitions Committee) -
  Saturday, April 24, 2010, 10:30 AM - 12:30 PM

• International Subcommittee Meeting -
  Friday, April 23, 2010, 1:00 PM - 2:00 PM
  Co-chairs: Samantha Horn, Francesco Portolano and Sajai Singh
  Updates will be offered from various jurisdictions outside the United States with respect to the regulatory framework for funds, broker and adviser registration issues, tax issues, and other issues affecting private equity and venture capital investors.
  
  
  
• Angel Venture Capital Subcommittee Meeting -
  Friday, April 23, 2010, 2:00 PM - 3:00 PM
  Chair: Yoichiro ("Yokum") Taku
  Roundtable discussion of standard documents and legal fees for early-stage equity financings, including the Series Seed documents, the NVCA documents, and various preferred stock financing documents published by incubators such as Y Combinator and Techstars. Discussion of other convertible debt terms and legal fees for convertible debt financings prior to VC-led Series A financings. Also, planning for possible subcommittee project.
  
  
  
• Private Equity and Venture Capital Committee Meeting -
  Friday, April 23, 2010, 3:00 PM - 4:30 PM
  Co-chairs: Samantha Horn, Francesco Portolano and Sajai Singh
  
  
• Transactional Issues and Documents Subcommittee Meeting -
  Saturday, April 24, 2010, 1:00 PM - 2:00 PM
  Chair: Herbert Fockler
  The subcommittee will be discussing first drafts of sections of its current commentary project on the certificate of incorporation used in venture capital transactions. The subcommittee will also have its usual roundtable of current issues and trends that participants are seeing in recent venture capital transactions and VC-backed companies. Experienced VC attorneys and those new to the area are both welcome.
  
  
  
• Venture Capital and Private Equity Funds Subcommittee Meeting -
  Saturday, April 24, 2010, 2:00 PM - 3:00 PM

Cru - A Wine Bar
1442 Larimer Street
Denver, CO 80202
Saturday, April 24, 2010 from 6:00 PM - 7:30 PM
» Registration Form

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The Editorial Board is collecting articles for future newsletters which are circulated to our members worldwide. Please send your submissions to Eric Koester at ekoester@cooley.com.

Articles should be 1500 words or less, and on any topic of interest to practitioners in the private equity and venture capital sectors. From short scholarly articles, to practice tips, reviews/summaries of a Section program, life in the trenches, interesting pro bono projects, humorous looks at life and the law, or even how you balance work and personal life. We appreciate your help in making this newsletter a success.

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