what does a venture capital lawyer do

What Do Venture Lawyers Do?

• Sound Legal Advice. The first, and most important, quality of any venture lawyer is that they are a good lawyer. ...
• Current Market Insight. The second essential quality of a good venture lawyer is that they understand the venture market. ...
• Open Doors to the Startup Ecosystem. ...

Full Answer

What does a venture capitalist do?

Venture capitalists spend their time on this process of raising funds, finding startups to invest in, negotiating deal terms, and helping the startups grow. You could divide the job into these six areas:

How do venture capital firms raise capital?

Venture capital firms raise capital from Limited Partners, such as pension funds, endowments, and family offices, and then invest in early-stage, high-growth-potential companies in exchange for equity (i.e., ownership in the companies). Then, they aim to grow these companies and eventually exit via acquisitions or initial public offerings (IPOs).

Is a venture capital job a good way to get rich?

Venture capital is a “get rich slowly” job where the potential upside lies decades into the future. If your main goal is becoming wealthy ASAP or advancing up the ladder as quickly as possible, you should look elsewhere.

What does a VC lawyer do?

Venture capital (VC) lawyers are specialized attorneys who provide legal services and advice to VC firms about fund formation and liquidation, fundraising, due diligence, regulatory compliance, investment strategies, portfolio company management, intellectual property, tax issues, litigation and dispute resolution, and ...

Is venture capital a stressful job?

The perceived glamour of venture capital can sometimes eclipse the job's reality. It can be a lonely career, a risky one, and extremely stressful considering you are responsible for other people's money.

Is venture capital a good career?

Overall, the career as a Venture Capitalist is a highly responsible, respected, and rewarding experience. Largely, there are two aspects that do not go well with a career in Venture Capital. Firstly, getting into this niche industry is extremely difficult.

What are the duties of a venture capitalist?

The main duties a venture capitalist performs are:Investing in new companies. A venture capitalist helps drive innovation by funding the needs of a startup. ... Providing business expertise. ... Managing funds for partners. ... Closing an investment. ... Early-stage capital. ... Expansion capital. ... Late-stage capital. ... Acquisition/buyout capital.

Do you need an MBA for venture capital?

“Venture capital will run where entrepreneurship is growing,” he tells Fortune. “I think there will be more positions and more appetite for venture capital.” While an MBA degree can certainly hone a technical skill set necessary for a job in VC, there's a practice much more valuable for pursuing a career in the field.

Does venture capital pay well?

In general, VC associates can expect an annual salary of $78,000 to $147,000. 1 With a bonus, which is typically a percentage of salary, the overall compensation can be much higher.

How hard is it to break into VC?

It's very difficult to break into venture capital directly out of undergrad, and even if you have the background for it – i.e., you went to Stanford or Berkeley, majored in CS, and completed multiple startup and finance internships – it's not necessarily a great idea to do it.

Are venture capitalists rich?

VCs can get rich even on small waves of successful businesses (though unicorns are better). Here in the United States, a typical VC firm economics structure follows a 2%/20% rule. As mentioned above, the 2% rate represents management fees. 20% represents something called carry.

What skills are needed for venture capital?

Here's the necessary skills checklist:Being able to raise money.Solid networks of Limited Partners.Domain experience (and with any luck, in a sector the VC partners find exciting).Prior investing track record.Strong access to high quality deal flow.Relationships with seasoned, all-star serial entrepreneurs.More items...•

How much do VC make?

A successful VC for a top-tier firm can expect to earn somewhere between $10 million and $20 million a year. The very best make even more. Meanwhile, there's also the “management fee” of 2% or 2.5% that venture capital firms charge their investors.

How do VC make money?

“Venture capitalists make money in 2 ways: carried interest on their fund's return and a fee for managing a fund's capital. Investors invest in your company believing (hoping) that the liquidity event will be large enough to return a significant portion: all of or in excess of their original investment fund.

What is venture capital in simple words?

Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions.

What can a venture capital lawyer do for my business?

The venture capital lawyers at Herman Jones LLP provide specialized services and legal counsel to VC firms in all stages of development. From formation to exit, we are with our clients every step of the way.

Venture Capital Regulations

Venture capital firms must navigate complex SEC regulations related to their investments and equity. With the help of an experienced venture capital lawyer, your firm can ensure it’s in compliance with these regulations.

Portfolio Company Representation

Herman Jones LLP provides post-acquisition legal representation for portfolio companies. Our attorneys have extensive business backgrounds and are up-to-date on current trends, regulation updates, and changes in our clients’ industries.

Contact Our Top Venture Capital Lawyers Today

Herman Jones LLP is here to help you with your venture capital matters. If you are seeking representation, we can help you choose the right path forward and will provide top-notch, personalized legal counsel for you and your business.

1. Does Your Venture Capital Attorney Have The Right Experience And Judgment?

When it comes to startup legal advice, experience and judgment really matter a lot.

2. Is Your Venture Capital Lawyer Practical And Efficient?

Time is money. And money is money. Your venture capital lawyer should know how to get projects and deals done quickly.

3. Does Your Counsel Communicate Effectively?

Not everyone is a serial entrepreneur who has already been around the startup block many times before. Your venture capital lawyer must be accessible and know how to explain legal and business concepts in a straightforward and digestible manner.

4. Will Your Venture Capital Attorney Prioritize Your Projects And Move Quickly?

As a founder, your startup is your main focus and priority. It needs to be nimble and move quickly to take advantage of financing and other opportunities as soon as they arise.

5. Is Your Lawyer Organized?

Your lawyer needs to be organized with your corporate finance projects, documents and information, especially because founders often do not have the time or focus to do so.

6. Can Your Counsel Help You Start, Fund, Grow, And Exit?

Not surprisingly, it is best for your startup to select the right lawyer who can tell you how to incorporate a business in the right way, lead it through rounds of funding, and help prepare and advance it for eventual sale.

7. Does Your Venture Capital Lawyer Reflect Well On Your Startup?

Your investors will conduct extensive due diligence on you and your company. And who you select as your venture capital lawyer will reflect on your business judgment and your ability to build a team and run your company.

Why did you choose this practice area?

MH: Growing up I’d always been interested in being on the bleeding edge of technology, and this practice allowed me a window into that world while still practicing law. I also enjoy the collaborative nature of the practice.

What are the roles for associates and partners?

MH: Partners are typically more heavily involved earlier in the process, e.g. in negotiating a late stage venture term sheet or in negotiating an M&A letter of intent. After a term sheet or an LOI is signed, a partner will typically work with one or two corporate associates to see the transaction to a close.

What are the biggest challenges for lawyers and their clients in this market?

MH: I think the biggest challenge for lawyers in this space is what I call the “yesterday expectation.” Our clients like to “move fast and break things.” As you may be the first attorney that they’ve ever worked with, they may not have an appreciation for all the things that you do, and the amount of work that some “asks” will take.

What do you enjoy most about your work?

MM: I love the variety that my practice offers.

How should lawyers build a career in this market?

MM: Because venture capital is a smaller legal market than, for example, private equity, lawyers who develop an interest in the practice early have an advantage over those who try to lateral into it from a different practice later in their career, as the number of lateral positions is limited.

What are the current trends affecting the market?

MM: There are more venture fund dollars in the market than ever before. SoftBank’s Vision Fund is the most noteworthy example of this, but the phenomenon is much broader, and is changing the venture landscape in a number of ways, like the recent increased focus on founder controls and governance structures.

Do you have any career-defining moments?

MH: Moving to LA in 2012 to open this office is my career defining moment. The firm allowed me (as a fourth-year) to be the lone day-to-day person on the ground in a new and growing market. That decision ultimately set my career on the trajectory that it’s on today.

Dodd-Frank Wall Street Reform and Consumer Protection Act

12 U.S.C. Section 5301 et seq. discusses the Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed in 2010. The Act introduced several new legal requirements for fund managers, investment banks, and other people in the financial industry.

Venture Capital Proposal Basics

To improve the chances that a proposal will be taken seriously by venture capital organizations, the entrepreneur needs to provide several basic elements:

How Venture Capital Works

Those people who invest in a new or growing business typically are wealthy individuals, investment funds, or financial bank subsidiaries, and are called venture capitalists. Because of the risk involved, these people typically get significant control over business decisions and maintain a large ownership percentage in the company.

Potential Disadvantages of Venture Capital

There are several potential disadvantages to consider with venture capital. These include possible loss of control over the business and potentially high costs over the long run.

What is venture capital financing?

While the investment instruments (e.g., convertible notes, equity) used in VC funding arrangements are similar to loans and equity investments in other sectors, venture capital financing involves an entirely distinct set of business expectations, legal terms, and relationships. Unlike loans and equity investments in established businesses, for which the expected return consists of interest (loans) or predictable year-over-year growth (equity), venture capital financing looks to establish equity positions in relatively new businesses that are poised to grow dramatically. Returns depend on extremely high (and often rapid) growth in the underlying business. This dynamic means that most investors interested in VC funding work very closely with the company—legally and practically.

What is investment contract?

The investment contract is a complex legal instrument consisting of several key documents. As an investor, it is important to negotiate the terms with the help of an experienced investment lawyer so that the terms are in your favor.

Why are financing vehicles structured as loans?

This can benefit investors because they usually get special assurances or warranties in exchange for taking on the risk of an unspecified valuation.

Can venture capitalists invest as a group?

Most venture capitalists invest not as a single individual but as a group. Many of the same laws apply to such funds as would apply to hedge funds. You must be careful to comply with the Investment Company Act and other SEC regulations. This means that you cannot publicly solicit any potential co-investors, along with other limitations. Because such joint investment ventures can be quite complex, consult your investment lawyer to make sure that you do not accidentally violate securities laws and that all your paperwork is in place.

What is venture capital?

Venture capital firms raise capital from Limited Partners, such as pension funds, endowments, and family offices, and then invest in early-stage, high-growth-potential companies in exchange for equity (i.e., ownership in the companies).

What is a senior associate in VC?

At most VC firms, the post-MBA Associate or “Senior Associate” role is a Partner-track position. As the name implies, you win the role after completing a top MBA (ideally at Harvard or Stanford), or, in some rare cases, from a direct promotion.

Is venture capital better than partner?

It is very difficult to advance to the Partner level, or to even get on the path to doing that; venture capital is often better as the last job in your career rather than the first.

How to start a venture capital firm?

Work with a firm. Begin as an associate and move up to a position as a partner, making decisions for new investments. Start your own firm.

How does a venture capitalist help a startup?

A venture capitalist helps drive innovation by funding the needs of a startup. VCs invest funds into a company in exchange for a share in the profits and decision-making power within the business. Venture capitalists usually work within a firm to seek out investment opportunities for their own clients.

How to become a venture capitalist?

To have a career as a venture capitalist, consider these steps: 1 Earn a degree. A Bachelor's Degree in Business with a specialization in finance will help you build the basic skills needed for a career in investing. 2 Consider an MBA. An advanced degree may give you an advantage in training and expertise as you pursue working in venture capital investment. 3 Work at a bank. Gain experience in your field working at a bank that invests in businesses. Funding small business ventures will help you gain knowledge of the startup process. 4 Become an entrepreneur. Venture capitalists who have started and grown their own business are considered valuable in their field. Investors with experience in startup companies can often work in venture capital without prior financial education or training. 5 Work with a firm. Begin as an associate and move up to a position as a partner, making decisions for new investments. 6 Start your own firm. Use your knowledge and expertise to control your own investment opportunities and bring in strategic partners to fund new ventures.

What do VCs invest in?

Some VCs also focus their investments on pioneering markets like genetics and energy. If a business offers fast growth and new ideas, a venture capitalist is the one to take notice and make a calculated investment. Entrepreneurs look to a venture capitalist to provide more than funds.

What do VCs do when a company goes public?

When a company is ready to go public, some VCs specialize in providing the funds that will help set up the initial public offering. They may also assist in finding a buyer for the company in a merger or acquisition. Venture capitalists involved in these stages of the company can earn money by selling off their stock.

What is early stage capital?

Early-stage capital. Some venture capitalists provide funds before a startup begins operating as a business. This type of venture capital assumes the most risk but allows for the greatest profit and growth potential by earning a share in the eventual revenue of the startup.

Why do entrepreneurs use VCs?

To do this, they find private investors to back companies for millions of dollars when the business may not have made any profit or product. VCs allow entrepreneurs to quickly grow a business's infrastructure from an innovative idea to a working company.

What Can A Venture Capital Lawyer Do For My Business?

• The venture capital lawyers at Herman Jones LLP provide specialized services and legal counsel to VC firms in all stages of development. From formation to exit, we are with our clients every step of the way. Our legal team specializes in many fields that relate to venture capital, such as intellectual property protection, licensing, regulatory comp...

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Venture Capital Regulations

Portfolio Company Representation

Contact Our Top Venture Capital Lawyers Today