{"id":5249,"date":"2025-02-15T20:21:14","date_gmt":"2025-02-16T01:21:14","guid":{"rendered":"https:\/\/journals.law.harvard.edu\/hblr\/?page_id=5249"},"modified":"2025-08-19T12:46:26","modified_gmt":"2025-08-19T16:46:26","slug":"entrepreneurship-startups","status":"publish","type":"page","link":"https:\/\/journals.law.harvard.edu\/hblr\/entrepreneurship-startups\/","title":{"rendered":"Entrepreneurship & Startups"},"content":{"rendered":"\n
VOLUME 10 \u2022 ISSUE 1 \u2022 PRINT<\/h5>\n\n\n\n

DO FOUNDERS CONTROL START-UP FIRMS THAT GO PUBLIC?<\/a><\/h3>\n\n\n\n
Brian Broughman & Jesse M. Fried
<\/strong><\/em>Black & Gilson (1998) argue that an IPO-welcoming stock market stimu- lates venture deals by enabling VCs to give founders a valuable \u201ccall option on control.\u201d We study 18,000 startups to investigate the value of this option. Among firms that reach IPO, 60% of founders are no longer CEO. With little voting power, only half of the others survive three years as CEO. At initial VC financ- ing, the probability of getting real control of a public firm for three years is 0.4%. Our results shed light on control evolution in startups, and cast doubt on the plausibility of the call-option theory linking stock and VC markets.<\/h6>\n\n\n\n
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VOLUME 8 \u2022 COLUMNS<\/h5>\n\n\n\n

HOW DO I SELL MY CROWDFUNDED SHARES? DEVELOPING EXCHANGES AND MARKETS TO TRADE SECURITIES ISSUED BY START-UPS AND SMALL COMPANIES<\/strong><\/a><\/h3>\n\n\n\n
Janet Austin<\/em><\/h6>\n\n\n\n

Governments worldwide are increasingly recognizing that assisting the development of start-ups and small to medium enterprises may be critical to fostering job creation and economic growth. As such, there is a concerted effort to rework securities regulation to encourage the funding of these businesses through innovative approaches such as crowdfunding. However, one major problem with investing in securities issued through crowdfunding is that investors typically have limited-to-no ability to sell the securities. There are a number of over-the-counter, venture and small company markets trying to bridge that gap and proposals in some countries to develop new markets for these types of securities. However, such markets present significant regulatory challenges, as they have historically been plagued by fraud and \u201cpump and dump\u201d manipulation schemes. This Article considers these regulatory challenges and explores how regulators can work to improve the integrity of these markets as a way of encouraging their development.<\/p>\n\n\n\n

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VOLUME 5 \u2022 COLUMNS<\/h5>\n\n\n\n

VENTURENOMICS: ADJUSTING FOR THREE STANDARD PRACTICES MAY REDUCE VENTURE-BACKED COMPANY PRE-MONEY VALUATIONS BY 90%<\/strong><\/a><\/h3>\n\n\n\n
Jeff Thomas<\/em><\/h6>\n\n\n\n

While recent valuations attributed to venture backed companies may be shocking, the VC Math used to calculate the valuations is flawed. This is because VC Math: (i) treats unissued, and even non-existing, stock options as outstanding shares of stock; (ii) ignores the fact that much of the common stock and options to purchase common stock have not yet been earned; and (iii) values common stock and convertible preferred stock equally despite the fact that convertible preferred stock was intentionally created to be worth more.<\/p>\n\n\n\n

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VOLUME 4 \u2022 ISSUE 2 \u2022 PRINT<\/h5>\n\n\n\n

CROWDFUNDING: THE REAL AND THE ILLUSORY EXEMPTION<\/a><\/h3>\n\n\n\n
Jason W. Parsont <\/em><\/strong><\/h6>\n\n\n\n

Crowdfunding is commonly defined as raising small amounts of capital from a large number of people over the Internet. To avoid the expense of securities regulation, companies often crowdfund by giving away rewards (such as a free t-shirt) instead of selling stock or other securities. In April 2012, Title III of the JOBS Act sought to change this status quo by directing the Securities and Ex- change Commission (SEC) to facilitate securities-based crowdfunding through websites like Kickstarter. Congress and the President believed this would broaden access to sidelined capital and help companies grow and hire. But this \u201cretail crowdfunding\u201d exemption, open to all investors, was not the only means of crowdfunding in the bill. A last minute compromise, which has been largely overlooked, expanded the ability of issuers to use the private placement exemption, as revised in new Rule 506(c), to crowdfund from accredited investors. This \u201caccredited crowdfunding\u201d exemption provides a less regulated capital-raising alternative to retail crowdfunding that is available to the same companies and more.<\/p>\n\n\n\n

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VOLUME 4 \u2022 COLUMNS<\/h5>\n\n\n\n

MAKING EQUITY CROWDFUNDING WORK FOR THE UNACCREDITED CROWD<\/strong><\/a><\/h3>\n\n\n\n
Jeff Thomas<\/em><\/h6>\n\n\n\n

The Jumpstart Our Business Startups (JOBS) Act creates a new \u201ccrowdfunding exemption\u201d that will allow companies to raise up to $1 million every twelve months by selling their stock (or other unregistered securities) to both accredited and unaccredited investors, provided that the sales are made through registered intermediaries. This article summarizes why the crowdfunding exemption is important, explains how its expected costs are problematic, and proposes ways to mitigate those costs without sacrificing investor protection.<\/p>\n","protected":false},"excerpt":{"rendered":"

VOLUME 10 \u2022 ISSUE 1 \u2022 PRINT DO FOUNDERS CONTROL START-UP FIRMS THAT GO PUBLIC? Brian Broughman & Jesse M. […]<\/p>\n","protected":false},"author":109,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-5249","page","type-page","status-publish","hentry"],"jetpack_shortlink":"https:\/\/wp.me\/PgKEUK-1mF","jetpack-related-posts":[{"id":4778,"url":"https:\/\/journals.law.harvard.edu\/hblr\/volume-10-issue-1\/","url_meta":{"origin":5249,"position":0},"title":"Volume 10, Issue 1","author":"wgu","date":"March 27, 2020","format":false,"excerpt":"LEGAL & REGULATORY COMPLIANCE THE UNTENABLE CASE FOR KEEPING INVESTORS IN THE DARK Lucian A. 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