Venture Briefing: Over-reaching On a Non-Compete Can Be Costly Venture Briefing: Over-reaching On a Non-Compete Can Be Costly

Venture Briefing: Over-reaching On a Non-Compete Can Be Costly

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Venture Capital Investment in Silicon Valley Continues to Soar
Investors are funding companies at record pace, writing checks -- big, big checks -- to startups large and small that are creating everything from business software to cures for crippling diseases. A new report shows that last quarter was the largest for venture capital investments in Silicon Valley since 2000 -- an astonishing $9.1 billion -- refuting, for the time being, any murmurs of a slowdown or inevitable market correction.
(Source: Mercury News, 2015-07-17) Read the full article
SEC Probes Tech Companies Over Improper Pre-IPO Trading
The Securities and Exchange Commission is investigating whether investors in up-and-coming technology companies have been improperly selling shares before the firms debut on the public market, the Wall Street Journal reports. The boom in pre-IPO trading comes as tech start-ups soar in value and stay private for longer periods of time. Regulators believe the transactions could violate trading restrictions established in the Dodd-Frank Act of 2010.
(Source: The Washington Post (free reg. req'd), 2015-07-06) Read the full article
SEC Rule Could Give Companies Authority to Enable 'Clawbacks'
Public companies that re-state their financial results would be required to "claw back," or recover, any excess incentive compensation earned by their corporate executives under a new rule to be proposed by U.S. regulators. The proposed rule would apply to public companies of all sizes and to any executive officer who performs policymaking decisions and who has received incentive compensation, including stock options.
(Source: Reuters, 2015-07-01) Read the full article
Private Equity Firms Turning to Smaller Lenders to Fund Buyouts
The biggest banks on Wall Street have been forced out of some private equity deals by regulators, but private equity firms aren't missing out on that money. Smaller and less-regulated lenders have cornered a tiny portion of the leveraged lending market.
(Source: Business Insider, 2015-07-16) Read the full article
CFOs Confident on Economy, Plan to Increase Capital Spending
On a scale from 0 to 100, U.S. executives rate the outlook for the economy at 62.9, down from 64.7 last quarter but still the third-highest score posted since 2007. U.S. companies plan to increase capital spending by an average of nearly six percent over the next year, and also to increase spending on advertising and marketing by more than four percent.
(Source:, 2015-07-16) Read the full article
More SEC Action Expected Against Private Equity Fees, Expenses
The S.E.C.’s move to file civil charges against K.K.R. serves as a warning to the industry, which has been under close scrutiny by the regulator in the wake of the Dodd-Frank financial overhaul of 2010, which has imposed greater disclosure requirements. Over the past few years, the S.E.C. has conducted examinations of private equity firms and found that more than 50 percent of the time there were violations of law or weaknesses in the firm's control systems.
(Source: The New York Times, 2015-06-29) Read the full article
Fund Managers Boosting Interest in Mergers and Acquisitions
Fund managers are ramping up their interest in acquisitions, adding to the growing body of evidence that the buy side is poised to loosen its M&A purse strings. According to the study by State Street, investment firms class acquisitions as the top source of opportunity -- ahead of the likes of entering new markets and expanding distribution.
(Source: The Wall Street Journal, 2015-07-17) Read the full article
Entrepreneurs Finding Downside to Having Too Many Angel Investors
For entrepreneurs, nabbing numerous angel investors -- and prominent ones to boot -- has become a kind of trophy collecting, a chase that comes with some risk for their companies, and for many relatively new investors, a winning bet on a hot start-up can pay off richly in Silicon Valley cultural capital. But while young founders are taking advantage of what is probably one of the best times to be raising venture capital, there can be serious downsides.
(Source: The New York Times, 2015-07-06) Read the full article
Working Paper Highlights How Small Most Small Businesses Are
In their recent Federal Reserve Board of Governors working paper -- Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances -- central bank researchers Arthur Kennickell, Myron Kwast, and Jonathan Pogach document how truly small most small businesses are. They show that U.S. small businesses are much smaller than the upper bound of the Small Business Administration's definition of a small company (up to 499 employees).
(Source: Small Business Trends, 2015-07-13) Read the full article
Study Claims Employment Laws Leave Smaller Firms at Disadvantage
Research from Duke University's Fuqua School of Business found laws protecting employees from dismissal in developed markets could disadvantage smaller firms. Professor Sharon Belenzon says firms corporately affiliated in sets of companies with the same owner outperformed their standalone competitors in countries with tougher employee protections, due to their ability to move workers between companies without breaking employment laws.
(Source: Triangle Business Journal, 2015-07-17) Read the full article
Over-reaching On A Non-Compete Can Be Costly
David J. Carr

In a recent decision illustrative of the war on overbroad language in employee non-compete agreements, one court made it clear that trying to use “catch all” language and “blue pencil” provisions may backfire in a big way. Casting a wide net may spell serious trouble for the employer. Read full article online.


What is a “Financial Covenant”? An Illinois Court Decides
John Lawlor

If you were to ask a number of people whether a particular covenant in a contract was a financial covenant, you might get a wide variety of answers. Some might say that only the covenants that required the borrower to comply with financial ratios or metrics were financial covenants. Others might expand this to refer also to covenants that gave the borrower exceptions measured by monetary amount to general prohibitions against the payment of dividends, the incurrence of indebtedness or the making of acquisitions or other investments. Others might have different answers. Read full article online.


By The Numbers

U.S. venture capital firms raised $10.3 billion for 74 funds in the second quarter of 2015, according to data released by Thomson Reuters and the National Venture Capital Association. That makes it the strongest quarter for VC fundraising since before the financial crisis.
Source: Fortune – Venture Capital Fund Raising Hits Post-Crisis Peak


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Ice Miller has been one of the most active law firms in the private equity industry over the last decade, representing both entrepreneurs building great companies and the private equity firms and individuals that invest in them. We have extensive experience with all types of funds (formations and operations); mezzanine and senior secured financing; leveraged buyouts, roll-ups, build-ups, and consolidations; divestitures and exits; and complex litigation on behalf of investors and privately financed companies. In addition, over the past 10 years, Ice Miller has represented hundreds of emerging growth businesses in various industries on such matters as entity formation, capitalization, capital raising, alternative financing, intellectual property rights and protection, growth and exit strategies, corporate governance, tax matters, and many other legal issues that are critical to the growth and success of an emerging company.

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This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

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