Law Commons^™

Finance And Growth: The Legal And Regulatory Implications Of The Role Of The Public Equity Market In The United States, Ezra Wasserman Mitchell

Michigan Business & Entrepreneurial Law Review

The important study of the relationship between finance and economic growth has exploded over the past two decades. One of the most significant open questions is the role of the public equity market in stimulating growth and the channels it follows if it does. This paper examines that question from an economic, legal, and historical perspective, especially with regard to its regulatory and corporate governance implications. The US market is my focus.

In contrast to most studies, I follow both economic history and the actual flow of funds in addition to empirics and theory to conclude that the public equity …

Trust And Control: The Value Effect Of Venture Capital Term Sheet Provisions As Risk Allocation Tools, Jason M. Gordon, David Orozco

Michigan Business & Entrepreneurial Law Review

The parties to a venture funding agreement are in a state of coopetition. The parties account for perceived risk in the entrepreneur-investor relationship through varying levels of control demanded from and trust afforded to the other party. The level of risk perceived by each party may differ along individual aspects of the prospective equity deal. The provisions of the term sheet delineate the subjective risk perceptions of each party to the transaction by allocating control or trusting a party with decision-making rights. When negotiating term sheet provisions, a party should seek to understand and recognize the risk perceived by the …

Should Angel-Backed Start-Ups Reject Venture Capital?, Darian M. Ibrahim

Michigan Business & Entrepreneurial Law Review

The conventional wisdom is that entrepreneurs seek financing for their high-growth, high-risk start-up companies in a particular order. They begin with friends, family, and “bootstrapping” (e.g., credit card debt). Next they turn to angel investors, or accredited investors (and usually ex-entrepreneurs) who invest their own money in multiple, early-stage start-ups. Finally, after angel funds run dry, entrepreneurs seek funding from venture capitalists (VCs), whose deep pockets and connections lead the startup to an initial public offering (IPO) or sale to a larger company in the same industry (trade sale). That conventional wisdom may have been the model for start-up success …

Incubator Cities: Tomorrow's Economy, Yesterday's Start-Ups, Abraham J.B. Cable

Michigan Business & Entrepreneurial Law Review

Venture development funds (“VDFs”) are products of state and local government law that use public funds to invest in local start-ups, in the hope that these companies will then attract venture capital investment. Existing analysis by legal scholars largely assumes that establishing a private venture capital market is essential to encouraging entrepreneurship. This article challenges that assumption. It argues that VDFs and other policies focused on encouraging venture capital are outmoded and inconsistent with the ultimate economic development goals of state and local governments. In many industries, entrepreneurs can now get by with less capital because the cost of developing …

Venture Capital Investments In China: The Use Of Offshore Financing Structures And Corporate Relocations, Jing Li

Michigan Business & Entrepreneurial Law Review

Based on an analysis of the relevant Chinese laws and regulations governing the corporate governance structure of venture capital (“VC”)-invested firms, as well as a discussion on the feasibility of employing different alternatives to make direct and indirect VC investments in Chinese portfolio firms, this article studies a hand-collected sample consisting of the twenty-nine VCbacked Chinese portfolio firms that have been financed and listed from 1990 to 2005 in order to empirically show how these investments were actually made in practice. The findings show that twenty-three out of the twentynine firms received their VC investments in various offshore holding entities, …

A Very Quiet Revolution: A Primer On Securities Crowdfunding And Title Iii Of The Jobs Act, Thaya Brook Knight, Huiwen Leo, Adrian A. Ohmer

Michigan Business & Entrepreneurial Law Review

This essay introduces the complex regulatory regime that governs the public sale of all securities, no matter how small the offeror. It is intended as a rudimentary roadmap for the start-up or its counsel and will, hopefully, help to illuminate the traps for the unwary while providing an overview of the regulatory universe in which securities crowdfunding will operate.