For the last decade, Michael Avent has served as corporate counsel to up and coming startups in the technology and life sciences fields. He regularly aids these startups in negotiations of debt or equity financing, commercial agreements, general corporate matters, mergers and acquisitions. He began in New York and Boston but has now settled in Seattle, working with Perkins Coie LLP for the last 5 and a half years. His specialty is helping founders put money in their pocket through founder liquidity and secondary transactions.
What is Founder Liquidity? It’s the ability of a startup to secure highly sought-after early-stage funding opportunities via angel or venture capital firms with a much lower cost basis than typical multi-billion dollar long term investment vehicles.“Prior to the sale of the company, what are other opportunities to get the founder money in their pocket?” - @PerkinsCoieLLP Click To Tweet
Prior to the sale of a company, some founders and investors may acquire shares in the company through secondary transactions, typically after providing some financial support to the company. These secondary investors are typically known as founders or early employees. If secondary transactions are not effective in getting access to the money you need to run your company, it could represent an opportunity to raise more funds from other sources, such as angel investors or venture capitalists.
Secondary transactions can allow founders to close out their positions even if the company goes bankrupt. And it gives founders a chance to earn some extra money from selling their shares even when they are no longer running the company. Founders who want to make sure they get money even when their company sells have made finding ways to increase secondary liquidity a top priority.“I want to stress how important QSBS is for startups that may not have access to large amounts of stock in your early days.” - @PerkinsCoieLLP Click To Tweet
“I want to stress how important QSBS is for startups that may not have access to large amounts of stock in your early days.” Avent states. Qualified Small Business Stock, or QSBS is a great way to grow your wealth – both in terms of short-term capital appreciation and long-term compounding interest.
These are shares of stock in a publicly traded company, typically limited in number and not traded on an established stock exchange. They typically offer investors with low-cost vehicles to convert their non-dividend income into increase their income. Startups can purchase Qualified Small Business Stock through an online broker or authorized dealers directly through the company. It is important to note that Avent will only provide limited amounts of this type of stock to investors through any single sale and any sale is at the investor’s own risk.“Making money is hard. It's hard even when you have a great idea.” - @PerkinsCoieLLP Click To Tweet
“If there is one U.S. tax code to remember it is Section 1202.” Avent says, “because this allows you to write off business expenses”. Business owners who want to take advantage of this provision should talk with their tax advisors about how best to do so. Write offs on your income statements are confusing, even misleading, there are numerous rules that determine how they are reported.
Avent mentions, “Making money is hard. It’s hard even when you have a great idea.” Gain the guidance and strategies you need as Michael Avent shares his years of experience helping building and sell companies, by showing you how utilizing founder liquidity can lead to considerable success.