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Start-Up Law: Financing

Induction to Financing

Bridge Financing: Not Just for Bridge Builders

Because start-ups have large growth potential, they need large amounts of funding. This funding can come in several different forms including angel investors, convertible notes from venture capital firms, and preferred stock sales. For an overview of some issues related to funding, view the Bloomberg Law video below. It is about 7.5 minutes long.

For researches who do not know what bridge financing or convertible notes are, there are many free articles and blogs available on the Shared Secondary Sources tab and the Secondary Sources sub-page under this Financing tab.  Further, financing transactions are governed by a background of state law principals. Therefore, state specific-treatises are a good place to start if they are available. However, the provisions are largely open to party negotiation, so general treatises are also an appropriate place to start. Financing the Corporation by Richard A. Booth is one of many good treatises with specific treatment of the different kinds of financing available on the Secondary Sources sub-tab.

After looking at a treatise, there are many sample documents available to use as templates for drafting the relevant financial transaction. Documents from Practical Law Company and Business Transactions Solutions treatise are good templates because they explain why the provisions are there and when to modify them. These sample document, and others, are available on the Sample Documents and Online Tools sub-tab. Also available are financial calculators which can be used to determine how different financing terms will affect how much money founders will get in different liquidation scenarios.

Primary law in this area is involves state cases, federal cases explaining state law, and federal statutes. Cases regarding financing transactions largely concern basic contract torts, like fraud or fiduciary duties. Specific financial and corporate case databases are available on the Primary Sources sub-page. Relevant statutes include the Jumpstart Our Business Startups Act and Securities and Exchange Act.  More information about both are available on the Primary Sources sub-tab.