Pitching to Investors: How to Structure Your Friends and Family Round

This is the season when we gather our loved ones around us and think cozy thoughts about our friends and family. We’ll lucky to have them in our lives! They support us during the rough times and they share our joy when things go well…and sometimes they provide the financial backing necessary to get a company off the ground before opening the process to the complexity of institutional investors (or an eventual public offering).

But pitching your business to friends and family may not be as simple—or as cozy and risk-free—as it seems on the surface. Here are a few things to keep in mind as you structure your friends-and-family pitch.


Comply with securities laws

Securities laws are put in place to protect people from making bad investment decisions and being caught up in investment hype or froth that has no sound business case. Before you approach your friends and family for investment, make sure you’ve vetted the investment opportunity by legal counsel. There is no “friends-and-family” exception to the securities laws, and you need to make sure that the deal you’ve put together and its terms are consistent and compliant with both state and federal rules. This is really important! Failure to comply with securities rules can make future financings a lot more difficult and also expose the company to civil and criminal proceedings for breaking securities rules.

Be honest about the offering.

Your potential backers need to be sophisticated enough to understand that they may lose everything they put up. With friends and family, you have to be honest with them and they have to understand that success is absolutely not guaranteed. So-called “accredited investors” are presumed to be sophisticated and able to handle their own financial affairs, but state securities rules may have other tests they use, and your investment deal and offering materials that you prepare for your investors may need to include significant disclosures of risks. Also, be clear about your own risk exposure; if your idea generates income, will you pay them back before paying yourself? If your business struggles, will you accept a level of loss or risk that reflects what you’re asking from them?

Think about the investment opportunity

At the friends and family stage, many early stage ventures elect to offer convertible notes as their first securities offering. But there are other ways to structure investment deals, and some companies forego this traditional path and issue Series Seed stock or other forms of equity to friends and family. With the rise of ICOs, some companies are even considering offering coin to friends and family. Make sure you’ve thought through what the investment opportunity is, and how it will fit into the larger vision for the company.

Invest some sweat equity before making your case.

From a practical perspective, your friends and family will have more confidence in your plans if they’ve seen you at work—literally—for at least a few months before you turn to them for backing. If they recognize your commitment, they’ve heard you talk about your plans for a while, they see you toiling away in the garage, or they can hold and interact with a prototype you’ve designed and built, they’ll gain a clearer sense of your level of determination and business savvy. This is also important from a securities perspective as it helps show the bona fides of the venture. Again, disclosure will be important here, but it’s important to have operating history before you approach friends and family.

Keep your request specific and goal focused.

Instead of simply holding out your hands and letting your investors decide how much to offer, share a clear goal, and explain how you arrived at that number. Break down how this investment will be applied and share the amount you plan to contribute on your own. Make sure your investors understand that there’s a roof on what you’re asking for, but no clear roof on potential returns if your product does well in the marketplace.  This is important both from a practical as well as from a compliance point of view.

Invest in legal support.

At this stage, engaging with an attorney might feel premature, but think of legal guidance as an investment that will pay off quickly if it can clear the path to capital while protecting your relationships with the people you care about the most, and very importantly, ensuring proper compliance with securities rules. Take the right steps at the start, and your family and friends will still be with you as the years pass and your business grows. 



Founder Challenges: Equity Distribution

During the early stages of company inception and growth, you and your co-founders may feel like a family. All of you are working together, investing your time and passion in a shared vision of the future and weathering the risks and rainy days side-by-side, just as you embrace a world of amazing possibilities on the days when things are going well.

But working together with family can bring obstacles as well as benefits, and even though they may feel completely new to you, the challenges that you face during this chapter are surprisingly common. One such challenge is the need to discuss equity distribution. This can feel like an awkward disruption to the harmony and flow you’ve cultivated as a close-knit group. And if you’re like most groups of co-founders, you’re probably pushing this discussion to a back burner in the interest of teamwork.

But this conversation needs to happen, and the sooner the better. The stakes are high, and the decisions you make now can have long term ramifications as your enterprise grows and moves closer to public offering or sale.

As you sit down with your team to make these decisions, keep in mind that looking for shortcuts and a quick resolution to a difficult conversation can be dangerous—both for your relationships and your long-term profit potential. Ask these critical questions before you begin generating an equation that makes sense for everyone, including your investors and shareholders: What do we need most? What kinds of value will each of us bring to the table, both in the present and over time? And how can we measure those forms of value and find a way to make them comparable?

As corporate counsel, we often advise founders that we can help play a mediator-like role in helping them come to something that’s fair. And in our experience, the best way to reach a resolution as to what is fair is for everyone at the table to think and feel like what they are getting in terms of equity is fair. This sounds like a hopelessly vague standard, but it isn’t. Market data can help educate what “market pay” or “market equity” might be, but that’s one data point we use with founders. The key is for people to feel aligned and well compensated. Sometimes, that means everyone gets an equal share of the Company. Sometimes, that means someone gets a little more than others.

It’s important to emphasize why this conversation is so critical. In our practice, we’ve seen horror stories come to life, where founders are literally on different pages as to what their equity is. We’ve seen people negotiate compensation over text message and WhatsApp. This is very poor corporate practice, both from a legal as well as from a bookkeeping, accounting and tax perspective. These types of practices create the potential for huge headaches and giant lawsuits down the road.

Once everyone is on the same page about equity, work with counsel to memorialize the arrangement with stock purchase agreements. If there is a vesting component, every founder should file a Section 83(b) election with the IRS. Create a stock pool for future grants to lower-level employees. This sounds like common sense, but common sense is unfortunately not very common.



Working with Founder-Friendly Attorneys: Important Considerations

What does it mean to be “founder-friendly”, and how can a few simple questions help you identify a founder-friendly law firm from a mile away? If you’re looking for ways to protect your influence and company ownership, even as you hand over some control to independent board members and/or gain funding that comes with limitations and qualifications, keep a few things in mind. Some founders want to launch a company, hand over control, and then sell as soon as possible so they can move onto the next idea. But if you’d like to stay in the driver’s seat until you’re ready to change direction or let go on your own terms, you’ll need specific type of legal and business advice to make sure you’ve kept open every available option.

Here are some “founder-friendly” things you should think about:  

Supervoting Stock

A founder friendly law firm will help you understand how to implement supervoting stock, which may mean establishing two classes of common stock, A and B. Class A common stock carries multiple votes per share while Class B common stock carries only one vote per share. Sometimes, companies will also create a Class C, “no-voting” stock, for employee hires. Founders are typically the sole owner of the Class A, heavy voting shares.

There are advantages to disadvantages to this type of approach with common stock, and institutional investors can be wary of seeing multiple classes of stock in early stage companies. Nonetheless, many of the experienced entrepreneurs we counsel and advise have been keen to adopt these types of common stock classes and want this type of common stock class structure as a way of maintaining founder-control over the long term.


Founder Friendly Exits

While there are many founders who hope to run their company for decades, many entrepreneurs are hoping to build a company and exit by selling to a bigger player that can  better monetize or scale a good idea. It can be exciting for founders to receive an acquisition offer, but founders must keep in mind that some term sheets are better than others. There should be no rush to exit in the face of onerous terms that may handicap the founders, the company, or its stockholders. Founders need to be wary of post-closing representations and covenants that may impose additional obligations and liabilities on founders for months or even years after the closing. To the extent that a founder is transitioning to a bigger company (the “acqui-hire” process), founders should carefully review the terms of their employment, which may carry heavy strings with respect to future equity grants, covenants not to compete, or other intellectual property issues. If your company is composed of multiple stockholders or even multiple classes of stockholders, it would be completely appropriate for founders to be represented by separate counsel at an exit as well, to ensure that founder interests are kept in mind throughout the sales process. As controlling stockholders or members of the board, founders will have to juggle their fiduciary duties to the company and to minority stockholders in addition to their own interests, and having separate representation may be appropriate at that time.

Enhanced Dispute Resolution

We’re all heard horror stories about early-stage unicorns suddenly disintegrating because of lawsuits -- either lawsuits between founders (usually fighting over equity), or lawsuits between companies fighting over trade secrets or important data. Ideally, as a founder, you want to keep the risk of these disputes to an absolute minimum. While it’s impossible to shield your company from a completely random third-party lawsuit, founders actually have a lot of control over dispute resolution. Between themselves, the founders should be agreeing to mandatory and confidential dispute resolution mechanisms that will keep the temperature of any dispute very low and ensure that fights are kept behind closed doors and dirty laundry isn’t aired to the public. Employee and consultant contracts should also have robust provisions that protect confidential information and proprietary data, while also ensuring speedy and enforceable dispute resolution. Terms of service contracts should have enhanced dispute resolution provisions so that a company can regulate how its users are using the data provided through an internet or app service and to prevent data mining and scraping. And finally, companies can ask their stockholders and board members to consider confidential and bespoke methods of resolving internal disputes, both to keep costs low and to prevent such disputes from spilling over onto the front pages of industry papers, blogs, and newspapers. All of this can be accomplished and put into practice with the help of counsel that is astute and aware to a founder friendly perspective and approach.



Six Quick Tips for Stage-One Entrepreneurs

Before you choose legal representation and launch your startup, lay the groundwork and keep an eye out for a few expensive and common mistakes. These simple tips may seem rooted in common sense, but in the early stages, excitement and optimism can blind entrepreneurs to a few hazards that can lead to resets or financial sinkholes. Keep your eyes open, don’t expect too much too soon, and don’t assume that the path you’re on has never been traveled before.


1.       Overestimate costs and underestimate returns.

Keep your face toward the sun, but when it comes to budgeting for legal expenses and estimating the time required to accomplish tasks, stay conservative. To be safe, assume every step will cost twice as much and take twice as long as your calculations suggest.

2.       Don’t treat legal concerns lightly.

If you’re looking for legal shortcuts or financial loopholes that can take you to the finish line faster, stop doing that. Don’t play fast and loose with the law, and recognize that even minor oversights or innocent mistakes can put you back to square one at best, and land you with prohibitive fines and fees at worst. Stay square with the law from day one, and trust that relevant regulations -- labor regulation, securities regulations, and corporate and tax rules -- are designed for businesses just like yours.

3.       Protect your trademark and respect the registration process.

Even the biggest companies have to spend significant time and money rebranding, if and when they realize that a preferred branding strategy just isn’t protectible at the trademark office. Start speaking with counsel as early as possible about issues associated with your company name and other products you want to protect through the trademark registration process. Once you start to build brand equity, it can be painful (emotionally, legally and financially) to part with a brand that is just too exposed from a trademark perspective. Put together a strategy as early as you can with respect to brand protection.

4.       Outsource whenever possible.

Keep the core model of your business, your mission, and your major decisions well under your own control, but free your hands and your time by delegating everything else to others. This can include payroll administration, marketing, bookkeeping and accounting, outreach, or product development. You’ll need to decide which elements of your business require your own attention and let the other aspects go. 

5.       Choose your funding option with the long term in mind.

How much control will you cede to your investors with each of your potential funding options? If you choose to rely on friends and family, angel investors, crowdsourcing, or VCs, what degree of leverage will you maintain over the direction of your business? Keep in mind that your long term goals will influence your decision. How long do you intend to lead the company or retain ownership? Do you want to stay small or go public one day? Do you want to be at the helm forever, or are you looking to sell one day?

6.       Don’t confuse technology with efficiency.

We live in an time where the algorithms and technology you use to create your products and services, and the data generated through your interaction with your customers, is equally as important (perhaps even more important) than the actual products and services that you sell. You need to be very careful with how you protect this critical information; you could very well lose your competitive edge if this information is leaked to the public or if an employee or consultant walks away with it. Take the time to put in place adequate data protection policies, including non-disclosure agreements and IP assignment agreements, so that information generated for your company stays only with the company.



Seeking Funding for your Start-up? Watch Out for Misalignment

You’re launching a start-up, and you need capital. But depending on the size of your ambitions, your plans for the funds you intend to raise, and the long-term direction you’d like to take your company after your launch, you’ll need a comprehensive and well thought out funding strategy. You may prefer to keep your investors limited and your company small and lean, or you may be looking for VCs or institutional funding. But your chosen source matters, and it matters more than you may realize at the start.

Relying on the wrong kind of capital or turning to the wrong source for support can actually derail your venture before you even get off the ground, and the most common funding problem is one that start-up entrepreneurs often recognize too late:  misalignment. Misalignment means that the shared incentives and risks between you and your investors are not structured properly.

Here’s a quick summary of various types of funding approaches and some ways to avoid misalignment:

Friends and family rounds: It’s very common for startups to first raise money through “friends and family.” Typically, these types of rounds use convertible notes or SAFEs as the funding instrument. When doing a friends and family round, we recommend only work with friends and family who have significant experience and sophistication with investments in early stage companies. It’s tempting to want anyone with available capital--your best friend from university, your sister, your great aunt Gladys--to fund your venture, but this is an unwise idea for several reasons. Securities rules will vary by state but the less sophisticated your friends and family, the more likely you will need robust disclosures to remain compliant with securities rules. In general, friends and family investors will be the most “hands-off” of your investors, which means you will retain significant control even after the round is completed.

Angel investors: Angels are a common next step after friends and family for many founders. Angel investors usually provide anywhere from six to seven figures in investment, and while it’s not unheard of for angels to want a board seat, they generally tend to be hands off as well. The nice thing about working with angel investors is they are typically far more sophisticated than friends and family. Find an angel investor who has domain and subject matter expertise about your industry, who is well connected, and views the investment in your company and the relationship with you as a long term endeavor. Avoid angel investors who appear to make shotgun-style type of investments without a cohesive investment strategy, who don’t have good advisors for themselves, and who seek too much early stage control.

Venture capital investment: Institutional money usually comes in at your Series A or Series B raise, when you’re seeking to raise in excess of $1 million. Working with VCs brings several competitive advantages to an early stage company: financial support, a network of other portfolio companies, well-tested advisors, and access to potential customers and suppliers through VC channels. But it’s important to find the right partner. VCs will typically want board rights and some measure of veto power and control over the business direction of the company. Some (but not all) VCs will insist on the ability to terminate the founders and take control of the company if they are not happy. Investigate and ascertain whether the controls and rights being given to your VC partner are consistent with a shared vision, and if you need to consider giving VCs potential termination rights over you and other founders, make sure you are absolutely comfortable with this type of scenario taking place. It happens more than you think (most such disputes are behind closed doors -- but they happen).


Retail/Consumer Crowdfunding: Retail or consumer crowdfunding is very popular these days and should be considered by every early stage venture. Retail crowdfunding involves a company doing a raise through a crowdfunding portal. The company promises goods or services depending on the amount of money provided by a purchaser.

This type of crowdfunding should always be looked at. In contrast to traditional financing mechanisms, no equity or other obligations (other than sales obligations) are being incurred by the company raising the money. So it is possible to raise significant capital as a type of “advance” being provided by your customers, and then you use the money to develop products and provide them back once they are completed.

There are a lot of success stories of companies using this type of crowdfunding, but also many many horror stories, with founders seemingly taking millions of dollars from their customers and disappearing. If you are serious about doing this type of crowdfunding, there are several controls you should put in place to ensure legitimacy in the marketplace and to protect against consumer backlash and lawsuits in the event the product fails to launch.

Equity crowdfunding: Equity crowdfunding is now available to companies who want to raise money from either accredited investor or from the general public. There are a number of equity crowdfunding portals that help companies structure the sale of securities through crowdfunding. In our experience, equity crowdfunding should be thoroughly thought through as an investment approach. Angels and VC firms have different thoughts about equity crowdfunding, and it may be tough to find a good partner for future private financing once a company has crossed the bridge into some of the equity crowdfunding portals, particularly in doing a public offering. 

Coin offerings or ICOs: Raising money through the sale of coins is becoming an incredibly popular way of raising money. But there are significant risks, particularly securities risks, in doing an ICO the wrong way. The SEC has issued guidance on doing a proper coin offering, and is actively investigating companies who violate securities laws in doing a coin offering. As with equity crowdfunding, doing an ICO may inhibit a company’s ability to use more traditional private fundraising efforts and should be thought through as part of a long term investment strategy.



The Winding Road to Steady Growth: Choose a Law Firm that can Help you Find your Footing

As a promising start-up, you need a legal firm that can handle and protect your critical business information, trade secrets, customer data, and other intellectual property. But so far, your company is on the smaller end and your operating budget can barely see you through to the end of each month. You have high-value ideas (formulas, code, a high-potential business model) but you don’t yet have the engine in place that can turn your ideas into steadily growing capital. You need to get from here to there and you need to protect your high-value intellectual property along the way.

If you’re like many small businesses, you’ll experience some form of threat to your vital intangible resources before you’ve developed a robust legal infrastructure that can protect you. But you don’t want to spend every dollar “protecting” ideas that you can’t afford to develop. So how can you navigate your way safely through this difficult growth period in which you may have a lease on your workspace, a functional IT system, a team (even a team of two or three), and a few early clients, but you don’t yet have an active relationship with a legal firm? Here are a few things to keep in mind as you chose a partner who can help you. Look for a team with these qualifications: (Please feel free to add or delete any of these—These are just starting points for the text, similar to what we did last week):

1. Experience with companies like yours. Look for a firm that has a successful track record of bringing organizations exactly like yours through this no-mans-land and safely to the other side. Your company may be unique, but you’re not alone, and many others have traveled this path before you.

2. A belief in what you do. Choose a firm that will stay behind you, even if you hit a few setbacks and snags on your way to stability. You need capital in order to grow; you don’t need a legal firm that will drain your fragile stream of revenue and then disappear.

3. Listening skills. Choose a firm that will really listen—especially when you describe your concerns, not just your hopes and expectations. Positivity has a place, but you don’t need a relentless cheer brigade; you need someone who will anticipate your unique problems and head them off before they reach you.

4. Responsiveness. Choose a partner that will stay within range and appear when you need them, will answer your phone calls and emails, and will give you the straight advice you need, without sugar-coating, so that you can navigate difficult waters with some sense of certainty.

5. Flexibility. You need an unflappable team who knows they haven’t seen it all. They expect the unexpected and they recognize that technology and business evolve at blinding speed and in sometimes surprising directions. What will happen if your product appeals to consumers for reasons you didn’t plan or expect? What will happen if your intellectual property is used or applied in ways you didn’t anticipate? These things happen all the time, and you need a legal team that has a flexible mindsight and framework to help you keep up.



Information Protection in an Age of Unprecedented Access

Avenues for communication and information sharing are evolving exponentially in our digital world. Social media, photo sharing, and instant messaging have worked their way into the fabric of our lives, and this week, we’ve discovered that one of the most influential corporations in our modern marketplace (Amazon) expects little or no consumer push-back on the suggestion that customers place a corporate controlled surveillance camera inside of their own homes…literally

At the same time, with the rise of the gig economy and contingent employee-employer relationships, companies are exercising diminishing control over what their “employees” do, say, and share outside of the workplace.

But what happens to protected information if an employee leaves just after two weeks to do something else? What happens to a million-dollar idea that escapes out the door with a contract worker after a one-year service period with very few restrictions or limitations placed on either party? How can companies protect their content, code and business models? And just as important, how can service providers in a gig economy protect the intangibles that lie at the core of their careers and their ability to make a living (graphic art, code, notes, pitches, suggestions)?


While it’s important to speak with counsel about these issues, here a few practical suggestions.

1.       When managing, companies have to have written policies in place for different types of service providers, and in particular, have to be well versed and knowledgeable about the differences between employees and contractors under state and federal law. Tax, intellectual property, and employee rights are all impacted by management practices. Companies also have to ensure that they have the right protections in place to ensure that company information stays with the company after the service provider leaves. Confidentiality and arbitration clauses are now under heavy scrutiny by courts because of perceived company-side abuse, so it is very important that these critical clauses are drafted in conformity with current best practice.

2.       When hiring, companies need to make sure their hiring practices conform with state and federal labor laws. Not just anti discrimination and anti harassment policies -- a must for any modern company -- companies also have to think about whether the people they are hiring are properly classified as more traditional employees, or more loose “contract” or “gig” workers. The same legal frameworks that have governed labor law for decades is now being used to scrutinize “sharing” or “gig” economy startups.

3.       When looking for new projects, idea-based gig workers should feel free to circulate their own contracts to potential clients. Gig workers should make sure that their contracts carry appropriate terms for payment of invoices and any agreed-to terms regarding ownership and licensing of intellectual property contained during the engagement. Sometimes, it may not be possible to negotiate contracts (or a gig worker may be working through an intermediary that requires that all participants use a standard terms-of-service contract). In that case, it’s still important to make sure that the terms are agreeable and fair.

4.       When reviewing contract terms, examine the details carefully. As tech companies move into new areas to monetize relationships, particularly amongst professions like medicine and law, it is very important that contract terms are heavily scrutinized. Med-tech and Legal-tech startups are often run by engineers who have no background in the professions, and may be ignorant (or may not care) about ethical restraints such as fee-splitting, and client information protection (to name just a couple issues). Lawyers and doctors must be particularly careful with technology companies. Don’t assume that companies have a strong grasp of professional restrictions simply because they are in “tech”.  



Social Communities: Benefits and Obstacles for Entrepreneurs

Even just ten years ago, the term “workplace” called to mind factory floors, farms, high rise office buildings, trading floors, classrooms or hospitals. Then the recession came through like a tornado and in its wake, a new gig economy and a newly energized startup culture meant a flourishing sense of independence, economic urgency, non-standard hours, and shoestring overhead budgets.

By 2017, a vast number of America’s workers have started working without any specific “workplace” at all. We’re setting up shop in coffee houses, living rooms, basements, and trains, and as long as we have well-connected devices, we can literally work wherever we are—lying in bed, sitting by a public fountain, or in the waiting room of a bicycle repair shop. But these places, and even home offices, are not always conducive to our best work and best ideas.

A growing demand for functional workscapes (to invent a word) has given rise to the concept of social communities, or intentional spaces where entrepreneurs and independent workers can gather to meet others like them over a shared purpose. Companies like WeWork provide a social community dedicated to work, while other social communities are experimenting with co-living, co-dining, or new iterations of private clubs which focus on personal development.

Throughout our practice, we’ve been fortunate to work with a variety of types of social communities founded on a wide range of interests and principles. As we’ve worked more with these types of clients, we’ve come to recognize amazing benefits to social communities, but also certain obstacles that need to be overcome.


The Benefits of Social Communities

Here are some of the benefits that social communities provide:

1.       Access to like minded people. One of the greatest benefits of a social community is meeting other people who think and act like you. In a world sorely lacking in community, having a place where you can go and work, eat, engage with people over a shared passion, and meet others who are generally aligned with your values can be an amazing experience. It’s no wonder that in all areas of life (leisure, work and home life) entrepreneurs are looking for ways to implement a social community model.

2.       Networking. Idea generation and networking are mostly automatic in a social community. Simply sitting and working in the presence of others can foment new ideas, new perspectives, and new social connections that can lead to business contracts and professional relationships. Social communities that focus on a shared passion provide also people with another way to make friends or possible business partners and a practical way to meet new people.

3.       Aesthetic and controlled environments Architects have known for a long time that the way our spaces are designed can have a significant impact on every aspect of our lives, from the people we meet, to the work we get done and even the emotions we feel. Many of our social community clients are engaging in highly innovative experimentation in setting up these spaces. Everything from nests that are placed deep in the urban jungle, to retreats out in rural California or the Big Island of Hawai’i, and everything in between: social communities offer new opportunities for creativity with business models, and exploring how business can be sustained through helping people stay connected, all of which can be coordinated from the ground up.

4.       The Art of Sharing. Whatever your background or politics, it should be easy to agree that sharing makes the world a better place. And a well organized social community is ultimately about creating a space where people can share -- whether it’s ideas, clients, or resources.

Obstacles to Social Communities

When it comes to establishing social communities, here are some of the biggest obstacles we have uncovered in working with our clients:

1.         Sustainable revenue models. Generally speaking, social communities make their money through membership dues or other type of fee-for-services arrangements. In coming up with a sustainable revenue model, entrepreneurs interested in setting up a social community need to think through why people will choose their community over another one, particularly in a competitive community space (there are dozens of co-working companies now, for example). As the social community space matures, it’s important for entrepreneurs to keep thinking about the value they are providing.

2. Legality. Laws are unfortunately very complex when it comes to setting up social communities. Local and state laws will impact how flexible a company can be in setting up a new coworking or coliving space. Other types of social community spaces (retreats, co-dining communities) all implicate a variety of laws, many of which were designed to prevent or inhibit a community culture.

3. Traditional Business Concerns.

All of this is in additional to traditional concerns that weigh on a business -- finding and attracting talent, managing internal dynamics and disputes, attracting strategic partners, financing and other concerns. These remain important!

Check back on our blog as we will continue to provide updates and insights as to how entrepreneurs can build and sustain successful social communities.



What’s Driving Cryptocurrencies?

A few years ago, Bitcoin—today the most widely recognized form of digital cryptocurrency—was considered a gamble, a brilliant but untested archetype of universal currency, and in some cases even a fraudulent scheme. Quickly embraced by criminal elements due to the impossibility of tracing transactions, Bitcoin fell further into the margins of public conversation. Then it came roaring to the forefront with surprising speed. This autumn, Bitcoin investors have experienced some of the dizzying highs and lows that can make investing in cryptocurrencies feel like a night in a high stakes casino. Here are some of the questions we’re asking about cryptocurrencies with our clients at Comar LLP:

The Rise of ICOs

There’s been a lot of press on the rise of “Initial Coin Offerings” or “ICOs,” where companies are offering and selling coins as a way of making money. The SEC has offered guidance on ICOs, and in particular, they are asking people to determine whether or not the way coins are being makes them securities. If the coins are securities, then the sale and purchase of coins has to comply with US securities laws. We are analyzing coin offerings with our clients to help them structure the offerings to remain compliant with US securities laws, including appropriate disclosures to potential investors.  

Information management

One of the exciting things about cryptocurrency is its ability maintain a public “ledger” through a blockchain. Blockchain provides companies an interesting way to manage and control data. Note that you can separate out the concept of a blockchain from cryptocurrency, but their combination provides interesting ways to verify transactions and provide information to the public. As with all forms of information management, the structure of how a blockchain is implemented should be vetted by counsel.

Investing in coin

Because this is such an exciting frontier space, there is a lot of experimentation by companies as they try and figure out the best way to develop and sell coin. While there is a lot of honest experimentation going on, investors should be advised of the existence of fraud in the market place. In many ways, the explosion of ICOs is reminiscent of previous bubbles, and companies may be incentivized to make exaggerated claims regarding their coin in order to cash in on the excitement. Before you purchase new coin, make sure you have a handle on the technology and understand the regulatory and other risks associated with the purchase of cryptocurrency. The ethereum hack is a reminder that with new frontiers bring new risks, and that very early stage technologies can be particularly exposed to risk.

Feel free to reach out to us at Comar LLP for more information about cryptocurrency, and check back for more updates and further analysis as we start to provide more materials on legal and regulatory issues surrounding cryptocurrency.



Comar urges Supreme Court to strike down Trump travel bans


Our legal director, Inder Comar, has urged the United States Supreme Court to strike down the Trump travel bans. 

Comar signed onto an amicus brief submitted by International Lawyers for International Law, arguing that international law prohibits discrimination on the basis of religion and nationality, and that the U.S. Supreme Court must apply international law in reviewing the travel bans.

"The U.S. Supreme Court should look to and honor international obligations of the United States in reviewing potentially unlawful conduct by our President," said Inder Comar. "The President is subject to laws and is under the law. This is the essence of democratic government. If the travel bans do not comply with law, they must be struck down."

The brief was filed in support of the International Refugee Assistance Project and the State of Hawaii, the two chief plaintiffs who are litigating to overturn the travel bans. 

The amicus brief is provided in full here.


1 Comment

The Future of Legal Practice


Hi there,

My name is Henry Demasco, and I’m an Operations Associate at Comar LLP. From now on I’m going to be contributing my thoughts on the firm’s blog as often as I can, so be sure to check back here soon! The first thing I want to write about is the future of legal practice…

When asked about attorneys and what they do, most people look to Hollywood portrayals: probably of men and women wearing expensive suits pushing around papers from the tops of glittering skyscrapers, or perhaps Atticus Finch-like characters arguing persuasively in front of moved juries. (Actually, this image is surprisingly accurate in many cases.) But as time goes on, we believe that these glamorous traditions of the legal profession will be largely done away with. In its place will be a much leaner, more client-oriented way of doing business, in which lawyers are driven by the following directives:

·      A need to offer business as well as legal counsel. Sophisticated attorneys often have dozens of active matters that are live at any one time, and have observed countless different fact patterns involving countless forms of business relationships. Attorneys are not management consultants or CEOs, but a good attorney will have wisdom into business scenarios and can help clients structure deals and business outcomes based on what they have seen work in the past. This is something that many lawyers hesitate to do today, and it is something that template documents will never do.

·      An ability to cross legal disciplines. Lawyers will need to have the courage and the smarts to cross legal disciplines and master a number of different legal fields.  Good deal making requires knowledge of litigation, and good litigation requires the ability to think about a deal, and in today’s modern economy, domain mastery over information monetization and intellectual property is a must. 

·      An authentic commitment to positive values. Lawyers comprise some of the most educated members of a society, and we believe that sophisticated consumers of legal services will demand that their counsel display and prioritize a genuine commitment to the common good. This doesn’t mean that every firm has to have an Atticus Finch; but it might mean that corporate lawyers think about how to use a corporate structure to help mitigate social and environmental externalities, and in the litigation context, it might mean that litigators think about what it might to take to get warring parties to a meaningful and balanced settlement.

Stay tuned for more of our thoughts about the future, and how we want to position ourselves for it.



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Celebrating 70 Years of the San Francisco Lawyer Referral and Information Service!

The Lawyer Referral and Information Service’s Governing Committee, back row from left: Josh Ridless, John Hickman, Tad Devlin, Julianne Jensen, Deborah England, Michael Whelan, David Otsuka (chair), Phil Ward; front row from left: Blanca Young, Jill McInerney, Judge Patrice McElroy, Roger Meredith, Inder Comar, Pam Herzig, Renee Richards, and Mark Wasacz.

The Lawyer Referral and Information Service’s Governing Committee, back row from left: Josh Ridless, John Hickman, Tad Devlin, Julianne Jensen, Deborah England, Michael Whelan, David Otsuka (chair), Phil Ward; front row from left: Blanca Young, Jill McInerney, Judge Patrice McElroy, Roger Meredith, Inder Comar, Pam Herzig, Renee Richards, and Mark Wasacz.

Comar Law is proud to support the San Francisco-Marin Lawyer Referral and Information Service (LRIS), which celebrates its 70th anniversary this year!

Inder Comar, legal director at Comar Law, serves on the LRIS Governing Committee, continuing a tradition of providing quality legal services to the community. Mr. Comar has been a member of the committee for more than three years and looks forward to maintaining an active presence in the years to come.  

LRIS was founded in 1946 to support returning World War II veterans. Today LRIS fields 50,000 calls per year and works to connect clients with legal and social services.  In addition to connecting the community with much-needed legal services, LRIS supports programs such as the Justice and Diversity Center.

A full history of LRIS is available here and will be included in the summer edition of San Francisco Attorney, the Bar Association of San Francisco's quarterly magazine.


Comar Law Opens New York Office


Comar Law Opens New York Office

We are pleased to announce the opening of our New York office, right in the heart of lower Manhattan! 

The new east coast presence comes several months after our official introduction of new counsel at Comar Law.

The New York office will act as a launching pad and center of growth for Comar, as we look to expand our client base to the East Coast and also develop and cultivate significant expertise in areas of finance, litigation, and corporate counseling in both the New York and California markets.

We are at 95 Broad Street, 17th Floor, New York, NY 10004.


Comar to advise on IP issues to national Ghanaian research laboratory


Comar to advise on IP issues to national Ghanaian research laboratory

Comar Law legal director D. Inder Comar has been engaged by Ghana's premier national research institution to advise on intellectual property matters.

The engagement will focus on intellectual property best practices in the space of agricultural research.

The effects of globalization and climate change have placed increasing pressure on countries to develop new forms of food and agricultural production. 

Ghana is party to several international treaties with respect to intellectual property protection and licensing. Compliance with international IP law, and integration of licensing best practices, will permit the country to enjoy the rights associated with intellectual property development, licensing and development.

The engagement will have an on-the-ground component, with Mr. Comar working in Kumasi, Ghana, for approximately 10 days. 


Welcoming new counsel at Comar Law


Welcoming new counsel at Comar Law

We have exciting updates and announcements from Comar Law! First, we are pleased to welcome Kate Westmoreland and Rajeev Ananda to CL. Together Kate and Rajeev bring over 20 years of experience to the practice. If you haven't already worked with Kate or Rajeev you can learn more about them below!

In addition to welcoming Kate and Rajeev, we have also moved to a new office. We are now located at 995 Market St., 2nd Floor (just around the corner from the Impact Hub). The new space is at the WeWork Mid-Market location. We look forward to more collaborations and partnerships as we get to know the WeWork community.

Finally we thank you for your continued support of Comar Law during this exciting period of growth. We are looking forward to a busy and fruitful 2016. In the mean time we wish you a happy and safe holiday season!



Kate is an international lawyer licensed to practice in both California and Australia. She has over nine years of experience working with government, the United Nations, and academia on international law, data privacy, and human rights.  

A non-residential fellow with the Stanford Center for Internet and Society, Kate is recognized as an expert in international jurisdiction and government access to user data. She provides consulting advice to cloud-based companies and digital rights organizations on issues of privacy and responsible access to user data. 

At Comar Law, Kate acts as counsel to advise startups and early-stage companies on matters of civil litigation and corporate financing. She excels at researching the law on complex and novel situations, analyzing the implications for business, and providing advice that is accurate, concise, and pragmatic.

Kate is a certified information privacy professional (CIPP/US) and holds a Master of Laws in International Law (with merit) from the Australian National University, Bachelor of Laws from the University of Queensland (First Class Honors), and a Bachelor of Arts from the University of Queensland.


Rajeev is an experienced attorney specializing in commercial litigation, corporate compliance, and contract negotiation. Rajeev is admitted to practice in New York and California.

Prior to joining Comar Law, Rajeev served as General Counsel for a healthcare technology company where he oversaw all legal matters, including negotiating vendor and licensing agreements as well as HIPAA and HITECH compliance. Prior to that, Rajeev was an Associate at a litigation boutique firm where he represented clients in a variety of litigation and obtained significant trial, appellate, and arbitration experience.   Rajeev was also an Associate at a major, national law firm, Hughes Hubbard & Reed, where he represented a large pharmaceutical company in its products liability litigations across the U.S.

Rajeev obtained his Juris Doctorate at the New York University School of Law. He graduated from the University of California at Berkeley, where he earned Bachelor of Arts degrees in Chemistry and Political Science. 

Rajeev provides his clients with his sophisticated legal acumen while at the same time understanding their practical business needs.


Make sure to have those IP Agreements ready prior to a deal!


Make sure to have those IP Agreements ready prior to a deal!

In the excitement leading up to a deal, founders need to make sure that in addition to corporate documents being ready, they have their IP diligence completed as well. 


The key mechanism of IP diligence is the intellectual property and invention assignment agreement (or "IP Agreement").


In the absence of a specific writing, it can be unclear as to who legally owns certain work that is being done on the Company's behalf. The remedy for this is the signed IP Agreement. 


When an IP Agreement is signed between a service provider and the Company, it ensures that everything done by the service provider belongs to the Company. This is important because it helps to avoid a dispute down the road as to who owns what.


The classic situation is when founders break up, and they did not sign IP Agreements with the Company. If the Company goes nowhere, this is rarely an issue. But if the Company is successful, it can lead to disputes between early stage founders about who developed parts of the business. This can lead to lawsuits and messy stories in the press.


Another classic example comes out of working with independent contractors. Without the IP Agreement, it may be unclear if the intellectual property was actually ever given to the Company, even if payment was exchanged for services. People commonly hire engineers and other service provides off the Internet, and may never meet them in person. Particularly in those instances, it is critical that an IP Agreement be put in place.


There are countless templates on the Internet for IP Agreements. Whatever you use, have counsel vet the version to ensure compliance with relevant law. An attorney will also ensure that the template is specifically tailored for the business being done by the Company. Investors will want to see all IP Agreements and will frown upon significant issues with the paper trail here. In extreme instances, these may even hold up a deal. Make sure you have your IP Agreements ready to go so your company can make new deals with ease. 




Comar to Speak at International Forum on Peace and Justice in Kuala Lumpur

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Comar to Speak at International Forum on Peace and Justice in Kuala Lumpur

Kuala Lumpur at night. Courtesy of Dcubillas (available at

Kuala Lumpur at night. Courtesy of Dcubillas (available at

Comar Law’s Legal Director Inder Comar has been invited by the Kuala Lumpur Foundation to Criminalise War (KLFCW) to speak at their International Forum on Peace and Justice on April 18, 2015. Mr. Comar attends the conference as a special guest and will be granted the courtesy of a royal dinner under the auspices of the King of Malaysia, Abdul Halim of Kedah.

Mr. Comar will present his work as lead counsel on the Saleh v. Bush case, which challenges the legality of the Iraq War. He will present alongside prominent diplomats, professors, and legal advisors, including the Fourth Malaysian Prime Minister Tun Dr. Mahathir Mohamed and former UN Humanitarian Coordinator for Iraq Hans von Sponeck. 

Comar Law is grateful for the opportunity to discuss its ongoing work in protecting and advancing international human rights. 

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Comar Helps Close Strategic Partnership for Revolutionary Prosthetic Technology


Comar Helps Close Strategic Partnership for Revolutionary Prosthetic Technology

The Comar Law team is thrilled to share that our client UNYQa social enterprise pioneering 3D-manufactured covers for prosthetic devices, has partnered with 3D Systems, Inc., a global leader in 3D printing technology. Comar Law has advised UNYQ from incorporation through several funding rounds, and helped acquire their trademark in both the US and European Union.

In this most recent funding round, UNYQ secured investment from 3D Systems, Inc. as part of a larger strategic partnership with with the publicly traded, South Carolina-based company. This multilayer partnership, which involved a major exchange of intellectual property, will see UNYQ and 3D Systems join forces to advance 3D printing technology for prosthetics and orthotics. As part of the deal, UNYQ will commercialize 3D Systems’ personalized prosthetic fairings, braces, and casts, combining UNYQ's stylish, disruptive products with 3D Systems' manufacturing capacity and industry expertise

An innovator in both the wearable technology and 3D printing industries, UNYQ also represents a bona fide social enterprise: a for-profit company helping to make the world a better place by democratizing access to affordable, revolutionary technology for amputees. 

Congratulations, UNYQ!



Being fired may not be enough for an employment lawsuit

As part of our corporate counseling practice, we often review terminations or adverse actions for both employees and employers and help clients determine whether the law was broken.

One of the biggest misconceptions that exists in California (and federal) employment law is that simply being terminated is enough grounds to bring a lawsuit. In California, it's actually the opposite - employment is considered "at will" (meaning the company can terminate or the employee can leave) at any time. Of course, if there is a contract between the employee and the Company that provides for termination in a specific manner, then it is certainly true that the contract may have been breached.

Another misconception is that a bad boss can be grounds for a lawsuit. Again, this generally is not the case, either. Simply having an arrogant, overbearing or unprofessional boss is not enough to make a claim for harassment or illegal conduct.

California law protects people from harassment and discrimination on the basis of a protected class. If a Company fires someone because that person was a woman, or treats someone poorly because that person is a woman, California law has likely been violated. And certainly, someone with poor management skills may be at greater risk of such claims. But California law requires more than simply being let go, or having a jerk for a boss, in order to bring a claim -- for better or for worse.



The IP assignment versus the IP license

There's a big difference between a "license" and a full "assignment" for intellectual property rights.

An intellectual property assignment usually means a complete transfer of intellectual property from one party to another. 

In contrast, a license is usually a subset of rights to another party, which can only use the intellectual property in specified ways and for a specified length of time.

A copyright license might say, for example, that a party can only use a certain image or song, perhaps only in the United States or only on a certain webpage. 

A full assignment of an image would give a party the right to use the image in whatever way he or she wants, or to create derivatives of the copyright.

Sometimes people speak of "exclusive" licenses, but this phrase should be unbundled. An exclusive license to use certain intellectual property may simply mean that only one party can use it; but it still might be constrained by length of time, geographic location, or other limitations. 

A fully exclusive, non-revocable, perpetual license comes close to being a full assignment, and for practical purposes accomplishes the same things. But a full assignment will actually transfer ownership in a more complete manner.