Upload
mit-forum-of-israel
View
282
Download
4
Tags:
Embed Size (px)
DESCRIPTION
THE 5M $ COMPETITION LAUNCH IN ISRAEL BY 43NORTH April 30th, 2014
Citation preview
A Guide for Israeli Start-Up Companies Entering the U.S. Market Through New York StateThrough New York State
Key Legal and Business Issues
Asaf Hahami, Esq.
April 30, 2014
The New York State Start-Up Scene
� “Start-Up New York” Program
– startup.ny.gov– startup.ny.gov
� New York City – Silicon Alley, Cornell Technion/Google Expansion in West side of Manhattan/Midtown East expansion/Tech and life science hub Brooklyn
� Upstate – Capitol Region – Albany – Collaboration
� Western New York – More than a frontier, but a growing Start-Up ecosystem near Niagara Falls and Canadian tech hub
� 43North – World’s largest business plan competition in America’s most affordable City (Buffalo)
Market Potential and Trajectory
� Entrepreneurs from Israel set up between 600-700 new tech companies each year. Israel has 6,000 or so active start-ups, but companies each year. Israel has 6,000 or so active start-ups, but only 1,000 of those successfully raise venture capital locally, according to IVC Research Center. Some of those have unique IP.
� Many Israeli companies already in U.S. (Silicon Valley, Boston, NYC – estimated 200 Israeli tech start-ups are in NYC alone); 65 Israeli companies on NASDAQ.
� Attractiveness of New York State as Market Entry Point –diversity, size, types of markets, breadth of industries, etc.
� Typical Trajectory of Israeli company entering the U.S.
What An Israeli Company Needs to Enter U.S. Market
� Money – refer you to 43North and other investors
� Support – 43North accelerator program and other accelerators� Support – 43North accelerator program and other accelerators
� Access to U.S. Market – need for market penetration
– Requires commitment of executives and dealing with host of legal and business issues
Questions About Entering U.S. Market
� If you are an Israeli founder thinking about a move to a larger market, how do you enter the U.S. market? What is your market, how do you enter the U.S. market? What is your roadmap?
� How do you establish and capitalize a subsidiary or other U.S.-based entity?
� What key legal and business issues do you have to worry about as you leap into the U.S. market (corporate structure, tax, finance, operations, marketing, employee/HR issues, intellectual property protection, immigration)?
� What are the rules of the road that you must think about?
Formation & Tax Planning
� Delaware “C” Corporation with authority to do business in New York StateNew York State
� C Corp as preferred vehicle for Israeli subsidiary in U.S. and for venture capital financing from U.S.-based funds
� Limited Liability Company
– Advantages and disadvantages
� U.S. tax issues vs. Israeli tax issues
Tax Treaty and IP Issues
� U.S.-Israel Tax Treaty
� Intellectual Property Location, Transfer and Sale Issues
Venture Capital Financing Features of Preferred Stock
� % “Interest” on Investment
� Liquidation Preference� Liquidation Preference
� Participating Preferred vs. Convertible Preferred
� Anti-Dilution Protection Formulas
� Dividend Rights (simple vs. cumulative/accruing)
� Conversion Rights
� Special Voting Rights
� Redemption Rights
What’s Left for Founders and Employees?
� Sweat equity gets common stock.
� Capital gets rights, preferences, privileges and protections of � Capital gets rights, preferences, privileges and protections of preferred.
� Founders and employees get potential for upside and incentive to drive up enterprise value.
Employees in the U.S.
� Will have to deal with a host of applicable U.S. federal, state and local laws and regulations. local laws and regulations.
� Ensure proper employment agreements with confidentiality and IP assignment agreements in place
� Document employee grants to avoid diligence problems down the road
� Employees vs. Independent Contractors: Your company does not want to be in a situation where your independent contractor is later found to be an “employee” for federal and/or state law purposes, so avoid penalties.
Equity Incentives
� Stock Options
� Restricted Stock � Restricted Stock
� Vesting
� Change of Control
� Employer Protections
– Limited window to exercise stock options, repurchase rights, rights of first refusal, drag along
� 83(b) Issues
Space and Real Estate Leases/Equipment Leases
� Accelerator Programs
� Real Estate Leases� Real Estate Leases
– Written lease
– Dealing with landlords
– Limits of use of property
– What happens in a change of control?
� Equipment Leases
Intellectual Property Protection in the U.S.
� Investors, acquirers and commercial partners will perform due diligence of your company’s intellectual property protection in the U.S. the U.S.
– Does the Israeli company really own the IP? Can third parties step in and claim ownership?
� IP Assignment Agreements – differences when involving individual, previous employer, university, government
� Patents
� Trade Secret – what is protectable?
� Trademarks and Service Marks
� Copyrights
Data Security and Privacy – the U.S. Legal Framework
� U.S. federal privacy laws
� HIPAA for health information� HIPAA for health information
� Gramm-Leach-Bliley Act (GLBA) for financial activities
� Children’s Online Privacy Protection Act (COPPA) and FTC guidelines
� State privacy laws
� Data security requirements
� Privacy policies
Other Issues
� Customs
� Commercial law issues – unique contractual issues� Commercial law issues – unique contractual issues
� Distribution agreements
� Joint ventures
� Sales representative laws in various states, and payment of commission
� Additional securities law issues as company grows
� Antitrust issues (for larger companies)
Immigration Status While in U.S.
� F-1 Immigrant Student Entrepreneur
� L-1 Visa for Intra Company Transferees � L-1 Visa for Intra Company Transferees
� L-1 New Office
� E-2 Treaty Investor
� H1-B Specialty Occupation
� EB-5 Immigrant Investor
For Further Information, Contact:
Asaf Hahami, Esq.
Phillips Lytle LLPPhillips Lytle LLP
The New York Times Building
620 Eighth Avenue, 23rd Floor
New York, NY 10018-1405
Email: [email protected]
Office: (212) 508-0432
Mobile: (917) 648-5060