This is a really important topic for startups about the risks of having unpaid interns and internships, so I have pasted below the full text of a recent Cooley LLP legal alert.

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A recent case in the U.S. District Court for the Southern District of New York, Glatt v. Fox Searchlight Pictures, Inc.,highlights how difficult it is for a for-profit business to create lawful unpaid internships. The court held that unpaid interns on the “Black Swan” movie set did not fall under the narrow “trainee” exception to the FLSA’s minimum wage and overtime requirements, despite the fact that they received academic credit for their internship. Continue Reading…

I often have a discussion that goes like this:

New employee:  “I want Founder Stock”

Me:  “I see, you want to buy Common Stock”

New employee:  “No, I want Founder Stock, just like the founders received.”

Me:  “There is no such thing as Founder Stock, you are talking about Common Stock.”

New employee: “I’m confused.”

Just to clear up the confusion, legally speaking, there is no such thing that is commonly known as “Founder Stock.”   Continue Reading…

Cooley LLP recently released a report on venture financings for 2012. The report provides a summary of data reflecting our experience in venture capital financing terms and trends. Information is taken from transactions in which Cooley served as counsel to either the issuing company or the investors.

Overall, our data pointed to a year marked by slowing deal volumes and stabilizing valuations. In 2012, we saw aggregate dollars raised reach $4.9 billion, down from $6 billion in 2011. The decrease in both deal volumes and invested capital was driven by a slowing financing environment during the second half of 2012. Median pre-money valuations were relatively flat across all deal stages with the exception of Series B transactions. We saw an increase in up versus flat/down rounds. Up rounds represented 75% of all financings in 2012, a level not seen since 2007. Additionally, the percentage of recapitalization transactions fell in 2012, as well as the number of tranched deals. Deal terms also mirrored the financing statistics. The utilization of fully participating preferred provisions was relatively flat from 2011 and we witnessed a decrease in pay-to-play provisions in 2012, compared to the prior year.

The full report can be downloaded here.