The Many Forms of Pay-to-Play
Pay-to-play rounds are becoming more common as startups deal with inflated past valuations and a tougher funding climate. Some structures penalize investors who don’t reinvest, others reward those who do, and hybrids combine both. Whether it’s a stick, a carrot, or a mix, these terms are reshaping cap tables and investor relationships across the venture landscape.
QSBS Planning for S Corps Under Section 1202
Many early-stage companies elect S corporation status to take advantage of the favorable tax treatment. However, as companies scale and plan for funding or an eventual exit, they often convert to a C corporation to qualify for the QSBS exclusion under Section 1202. This article explains the challenges S corporations face when looking to convert, and outlines the strategies that can help founders satisfy the requirements under Section 1202 and preserve eligibility for the tax exclusion at exit.
Preferred Economics in Venture Transactions
Venture financing isn’t just about valuation—it’s about how the deal is structured. Liquidation preferences and participation rights can dramatically impact founder payouts and investor returns in an exit. This article breaks down the most common preference structures, from 1x non-participating to capped participation, and explores how seniority and stacking work across multiple rounds.
QSBS Expansion – What You Need to Know
Congress made major changes to QSBS, expanding who qualifies and how much gain can be excluded. The asset cap rose to $75 million, and investors can now exclude up to $15 million or 10× their basis—whichever is greater. Shorter holding periods also now qualify for partial tax breaks. These changes open the door for both investors and companies to benefit from this powerful tax incentive.
Private Funds, Public Rules – What Fund Managers Need to Know
This blog breaks down what qualifies as an “investment company” under federal law and explains how private fund managers—like those running hedge funds or venture capital firms—can avoid burdensome public registration by meeting key legal exemptions.
Investment Advisor Exclusions
Not everyone who discusses money or investments is considered an investment advisor. This blog breaks down key exemptions for professionals like publishers, family offices, and those offering non-securities advice—and highlights how crossing certain lines can trigger SEC oversight.
Negotiating Warrant Terms in Venture Financings
Warrants are a common feature in venture financings, offering investors additional upside while impacting founder dilution and control. In this blog, VW attorney Bobby Gojuangco breaks down key warrant terms and explains why understanding them is critical to protecting your company’s long-term capitalization strategy.
Primer on Qualified Small Business Stock (QSBS)
Startup founders, early employees, and investors may be missing out on a major tax advantage. Thanks to the Qualified Small Business Stock (QSBS) federal income tax exclusion, eligible stockholders can potentially exclude up to 100% of capital gains upon an exit—saving millions in federal taxes. Understanding the key requirements and potential pitfalls of QSBS can make a significant impact on your financial outcome. Here’s what you need to know to maximize this powerful tax benefit.
Venture in the Middle 2024 Trends
In 2024, VW saw a sharp rise in pay-to-play financing rounds, reflecting tougher conditions for both startups and investors. While the market experienced corrections in valuations, early-stage venture funding remained strong and Safe notes remained the dominant financing tool.
Understanding 83(b) Elections: A Crucial Step for Startup Founders and Employees
If you’re a founder or an early employee at a startup, equity compensation is likely a significant part of your financial upside. However, the promise of equity can come with a maze of tax implications. Enter the 83(b) election: a relatively simple IRS filing that can save you thousands (or even millions) in taxes down the road. Despite its importance, many people overlook it—sometimes to their detriment.