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Fast & cheap startup funding
SAFEs and KISSes: Alternative investment vehicles can help early stage companies get financed
Documents such as the Simple Agreement for Future Equity (SAFE) or Keep It Simple Security (KISS) may help speed up early stage financing as well as reduce costs. The documents contain a standard set of terms and conditions that an investor and startup can agree upon without protracted negotiations - so the startup can obtain its initial funding relatively quickly and cheaply.
The basic concept is that the investor provides funding to the company in exchange for the right to receive equity upon some future event.
However, use of SAFE or KISS may cause serious problems for investors. The primary problem here is uncertainty. The SAFE or KISS investor will be required to accept whatever valuation the company ends up using, as well as the other terms that the company agrees to. Additionally, what if the company never does the next round of financing?
Equity compensation plans
Chancery court holds board to heightened fiduciary duty standard in connection with equity awards
A recent case out of the Delaware Court of Chancery could result in heightened scrutiny of equity award grants to nonemployee directors.
Although the decision was rendered at a procedural stage, the court’s interpretation of prior Delaware precedent is not likely to change after a trial. Therefore, companies should carefully consider their equity compensation plans and the process for determining director equity compensation. Specific attention should be paid to evaluating the maximum amount that a beneficiary could receive under the plan and whether the plan should treat all classes of beneficiaries (executives compared to non-employee directors) the same.
Bob's Upticks
Timely news and comments on securities and corporate governance developments.
Crazy is as crazy does – compensation run amok?
As we approach the end of the 2015 peak proxy season, the annual parade of articles and studies of executive compensation has begun.
If you accept that one symptom of insanity is to repeat the same behaviors over and over again while expecting different results, then it appears we’re in the midst of an epidemic of compensation craziness.
Why did anyone seriously think that say-on-pay votes would cause executive compensation to decrease?
I learned a long time ago – from the mouth of Pearl Meyer herself – that every attempt to rein in executive pay by legislation, regulation or disclosure (i.e., shame) has failed.
