Clean Energy Startups On the Lookout For the Next Round of State Funding
Clean energy technology entrepreneurs might seem to have reason to be more optimistic these days than their counterparts in other fields such as software and technology. After all, most VCs and industry observers maintain that quality clean energy startups remain good candidates for funding even in this challenging environment. However, promising clean energy startups can get caught in the dreaded funding gap between proof of concept in a lab setting and the establishment of commercial viability that might attract venture capital. This is where state support can be crucial. In Massachusetts, the SEED funding program administered by the Massachusetts Technology...
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Multiple X Preferences
In the rogue’s gallery of investor protective provisions that come out of their cave in bad times, the multiple X preference is among the first. A preference is a provision that gives an investor a return in the event of a sale of the business before any money goes to the common stockholders. So, in a typical (and very commonly seen in good times as well as bad) 1X participating preferred, the investors get a payment in an amount equal to their investment plus accrued and unpaid dividends before the common get anything. After receiving this payment, the investors participate with the common...
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Full Ratchet Antidilution
Bad times may well cause this beast to come out of its cave. Full ratchet antidilution is a provision that protects investors to the max from low priced issuances. The gist of this provision is that the conversion price of a security (usually preferred stock, but not necessarily) will be reduced to the lowest price at which a company sells any shares of its common stock. So, if you have 1,000,000 shares of preferred outstanding with a conversion rate of $1.00, these shares will convert into 1,000,000 shares of common stock. However, if these shares have a full ratchet antidiluton provision and you issue...
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