goodthinking! blog

Pre-post money price caps

One piece of received wisdom that, with experience, I’ve come to question is that convertible notes and their stepsiblings, Simple Agreements for Future Equity (“SAFEs”), are “simple.” Yes, the documents for these types of investments are generally quite short and deal with fewer issues, so they are (as we’ve noted in the past) easier and less expensive to generate than equity documents (which is the main reason for their popularity). However, I’ve come to recognize many subtleties in how convertible instruments operate; there’s more complexity than meets the eye.

In this post, I’d like to address one such subtlety: the difference between a postmoney and a premoney valuation cap. The difference results in resoundingly divergent economics.

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Categorised as: Fundraising

Using artificial intelligence intelligently

In my previous post about AI (specifically, AI large language models or “LLMs”) and its impact on the legal profession, I concluded that the current versions of LLMs would not replace lawyers but could serve as very able assistants. As our friends at Clausebase put it in a recent webinar: AI can take over a great many human tasks on the “production” side but the lawyer is still indispensable in carrying out key “creative” work.

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Categorised as: Lawyering

Guaranteed paid leave for Illinois employees

Illinois employers take note: Illinois recently joined two other trailblazing states (Maine and Nevada) in requiring employers to provide a minimum amount of paid leave for employees. Thanks to the new Paid Leave for All Workers Act (the “Act”), effective on January 1, 2024, employees working in Illinois (but not Cook County) will earn and accrue up to 40 hours of paid leave each 12-month period. Employees working in Chicago are already, and will remain, subject to the Chicago Paid Sick Leave Act, and those in Cook County have the Earned Sick Leave Ordinance.

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Categorised as: Lawyering

The questionable use of Terms of Use

Are your terms of use enforceable?

In the olden days, customers signed agreements using quill and ink; for many, a handshake sufficed.

These days, customers purchase many services and goods online. How do customers give their consent to the terms of their purchases in cyberspace [cue eerie music]? Most of our startup clients require their customers to agree to online terms of use (TOU), whether for a website or mobile app. The TOU set out “rules of the road” for customers, such as usage rights and prohibitions, which our clients need the ability to legally enforce. This ability rests on legal acceptance of the TOU by customers – without this, there is no binding contract.

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Categorised as: Lawyering

Don’t let the CCPA stop your startup goldrush – a primer on privacy in California

The behemoth General Data Protection Regulation (GDPR) governs the European Economic Area*. By contrast, no federal privacy regulation applies across all U.S. states.

A company must comply with regulations of the states in which it does business. As a practical matter, compliance is geared towards the state with the most stringent regulations. Effective January 1, 2020, the California Consumer Privacy Act (CCPA) remains the most comprehensive data privacy regulation in the U.S. (Maine and Nevada also adopted data privacy regulations recently, but both are narrower in scope than the CCPA.)

Much has been written about CCPA, and this post does not cover all (or even most of) the nuances of this law. Our goal here is to help you understand enough about CCPA to determine if it might apply to your business, or if you need to consult an attorney who can make this determination.

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Categorised as: Lawyering