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Financial Disaster Relief for Start-Ups – Yes, It Is Possible!

The specific challenge we are addressing here is for start-ups and other early-stage businesses. Gibbons attorneys are heavily involved in advising businesses in all industries and of all sizes on the full range of state and federal coronavirus disaster relief programs available to them. Start-ups and other early-stage companies face particular challenges in obtaining governmental relief. Gibbons understands this and is here to help. With our strong commitment to start-ups and other early-stage businesses, we recognize your dire need for funds for survival, as well as growth, at this critical period. We also recognize that the federal and state application requirements seem staggering. Founding teams are confronted with overwhelming requests for tax returns, current financial statements, monthly sales figures, and similar requirements. Which aid program(s) should you pursue? How do you decide? How does a pre-revenue or newly launched start-up demonstrate to federal and state agencies substantial economic injury? How do you determine the best route for disaster assistance with the highest chance of short-term success and without being overwhelmed by red tape? What is its most recent pre-coronavirus valuation, and how was it justified – for example, thought independent third party investments or a verified order pipeline? How much...

NJEDA Steps Up With Funding for Approved Accelerators and Their Qualifying Cohorts With Exciting New $2.5 Million “NJ Accelerate” Program

On February 11, 2020, the New Jersey Economic Development Authority (“NJEDA”) approved a $2,500,000 pilot program labeled NJ Accelerate (“NJ Accelerate”). The NJEDA expects to attract more accelerator and start-up activities to the State by encouraging the increased participation of New Jersey based entrepreneurs in accelerator programs that provide specialized expertise, mentorship, and technical assistance. The NJ Accelerate program will be organized in a two-step process: (1) accelerator operators will be pre-qualified (“Approved Accelerators”) and, (2) financial assistance will be provided from the NJEDA to domestic New Jersey early-stage companies that complete a program at an Approved Accelerator. With a $2,500,000 pilot program budget, the NJEDA anticipates that approximately 10-15 companies will be supported in the NJ Accelerate pilot program in addition to the support and engagement of at least five Approved Accelerators. Domestic companies from an approved accelerator and meeting certain requirements are eligible to receive direct loan support from the NJEDA up to $250,000 in the form of a 10 year convertible promissory note and will be in the same amount of investment dollars funded into the start-up by the Approved Accelerator. There will be no repayment obligation for the first seven years. Domestic companies are also eligible...

Equity Crowdfunding Turns Six Months Old: Looking at Title III for Investors and Businesses

November 16, 2016 marked the six-month anniversary of Title III of the JOBS Act of 2012 being fully implemented. Title III and the rules promulgated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) allow businesses to raise capital through “equity crowdfunding.” This is the act of raising capital from others via the internet, by seeking small investments from a large number of potential investors through the use of licensed broker-dealers or internet funding portals. These investments are exempt from the traditional security registration requirements. People are generally familiar with existing “crowdfunding” platforms such as Kickstarter, Indiegogo, and GoFundMe which have been in existence since at least 2008. These platforms practice rewards-based crowdfunding.  Backers give a “campaign” money, and the backer gets back a “reward,” i.e., a thank you note or the first edition of a product. Title III, however, allows for “equity crowdfunding,” which is the ability to buy ownership in an early-stage company and hopefully reap a monetary return on that investment. Instead of getting that thank you note or new product, the investor is getting a piece of equity in the company he or she just invested in. Many industry professionals and...

New Jersey State Pay-to-Play Rules and Federal Elections

New Jersey has its own individual pay-to-play rules that do not apply to federal candidates regardless of the state office that the candidate holds. The two sets of New Jersey pay-to-play rules (“Pay to Play Rules”) of concern are: (i) New Jersey statutory rules for state contracts under N.J.S.A. 19:44A-20.13-20.25, and (ii) New Jersey regulations of the New Jersey State Investment Council (“SIC”) pursuant to N.J.A.C. 17:16-4.1 to 4.11. The New Jersey Election Law Enforcement Commission (“ELEC”) and the New Jersey State Treasurer have stated that contributions to a federal account that are to be used only in federal elections will not trigger the New Jersey pay-to-play rules. See Advisory Opinion No. 03-2006; Letter of Bradley I. Abelow, New Jersey State Treasurer, June 23, 2006. The SIC regulations are applicable to political contributions and payments to political parties. See N.J.A.C. 17:16-4.2. Political contribution is defined as a contribution for the purpose of influencing any election for New Jersey state office, and under certain circumstances, any election for New Jersey local office. Since candidate committee for President is a candidate committee for a federal office, contributions to the committee are not political contributions. The SIC regulations define a “political party” as...