Choosing the right biotech startup lawyer will be critical to your company’s success, ranking among the most important decisions that you initially will need to make as you launch and grow your new biotech venture.
You will need to consider a variety of factors when choosing your biotech startup lawyer, including relevant experience with other biotech startups and the ability to handle the unique issues and transactions that biotech companies face.
The attorney that you select must have the skills and experience to assist with biotech startup funding transactions, including how to determine the best investment structures for the biotech at startup and during successive funding rounds, in order to address the biotech company’s intensive capital needs. Cost versus value (i.e., experience and quality) is another important consideration to examine as you finalize the selection of your startup attorney.
If you select well, your biotech startup lawyer actually will save you time and money, because he or she will have immediate and practical solutions to your startup legal questions, already having recommendations regarding the corporate, organizational and investment structures that your biotech company will require. The right biotech startup attorney will steer you in the right direction in order to make sure that, among other things, your biotech company’s intellectual property is protected with the right agreements in place and the stock ownership and equity compensation are properly structured with appropriate vesting and other customary terms.
At California Counsel Group, we act as outside general counsel to many biotech companies, advising and assisting them at incorporation and as they grow, helping them with their most important financing, commercial and sale transactions. As corporate attorneys based in the vibrant biotech community of San Diego, California, we work with many biotech entrepreneurs and scientists across a variety of therapeutic and diagnostic applications, but our reach as biotech startup attorneys extends throughout California, the U.S. and key international markets.
How We Work with Biotech Startups
Our work as biotech startup lawyers typically tracks our Start | Fund | Grow | Exit framework, which we explain below in more detail:
Many biotech entrepreneurs (and possibly you) have never started a company before. You likely will have many questions (and most scientists do), including what the best biotech organizational structure for your startup is, where and when should you incorporate, how do you allocate stock among the founders, etc.
We work with professors and researchers who spin ideas and technologies out of the lab, scientists who leave academia or their existing companies, and serial entrepreneurs who want to launch their next biotech venture. No matter the situation, it is critically important that you would with your biotech startup lawyer to launch your company correctly in order to preserve and protect its technology, financing opportunities and eventual value.
Below are selected services that we provide to our biotech clients during the Start phase:
- Incorporations involving one or more founders
- Equity ownership allocation among the initial founders, including stock vesting and IRC Section 83(b) elections
- Implement initial corporate structure, governance and key agreements in order to lay the legal foundation for future financing rounds, technology development and team building
- Scientific advisory board (SAB) formation and administration
- Stock option plan formation and administration
- Onboard SAB members, consultants and employees
- License agreements to in-license critical technologies and intellectual property from universities, research institutions and other companies
- Technology option agreements
- Material transfer agreements
- EIN and DUNS number for grant applications
Biotech startup funding
Many biotech companies need to raise funding from outside investors and, over time, it can involve multiple funding rounds and a lot of capital. Your biotech startup lawyer will need to be a highly experienced corporate finance attorney who understands the pros and cons of the different financing alternatives that will be available to you, including the best investment structure for your biotech startup at each stage of its growth and development. In particular, your attorney will need to be able to communicate the key financing issues clearly and concisely, so that you quickly can make the right financing decisions and continue focusing on the other critical research and development activities that you have ongoing.
Key financing issues will include how to determine your biotech’s valuation at startup and over time, and what investment structures should be put in place at startup and as your biotech requires more funding in the future. Your biotech startup lawyer will need to advise you on the immediate consequences of your financing decisions, and how they will affect later financing transactions and the related corporate structure, ownership and value of your biotech company.
Below are additional services that we provide to our biotech clients during the Fund phase:
- Seed Funding Rounds from founders, friends and family, including founder loans, common stock equity funding, convertible debt, and Simple Agreements for Future Equity (SAFEs)
- Growth Capital – Series Seed Preferred Stock, Series A Preferred Stock and follow-on rounds (up to Series M Preferred Stock for one ag-biotech company)
- Bank, mezzanine and other debt transactions
- Equity cap table management, tracking founder shares and vesting, restricted stock grants and stock option awards, convertible debt investments and conversion into shares of capital stock, and various rounds of preferred stock
- Financial modeling pre and post-financings to determine equity ownership and dilution
- Federal and state (blue sky) securities law compliance
Building your biotech startup
Your biotech startup lawyer will be busy helping you grow your company immediately after its incorporation. You are building and growing your team, your technology and your company, and the contractual relationships that you enter into along the way will have important consequences for the value of your company, especially as you negotiate financing transactions and when you sell your company in a liquidity or exit transaction.
Your biotech startup should be prepared to focus on, among projects, the following:
- Continued counsel and support to grow the operations and the team
- Corporate maintenance and housekeeping, including annual board and stockholder meetings
- Corporate approvals and support for board of directors, including written consents, meeting organization, mechanics and minutes
- Continued stock option grants and stock option plan administration
- Cap table management and stock issuances and repurchases
- Agreement negotiation, documentation, execution and organization
- Non-disclosure and confidentiality agreements
- Proprietary information and invention assignment agreements
- Master services agreements and related statements of work
- License, development and collaboration agreements
- Clinical research, development and supply agreements
- Document organization for due diligence preparation
Selling your biotech startup
The exit or sale of your biotech company likely will be the most complex and financially rewarding deal that you ever do. You need a biotech startup lawyer that knows the ins and outs of merger and acquisitions, and preferably someone who has counseled and guided your company to this point. M&A deals are intense and fast-paced, and your biotech startup attorney will need to know how to navigate the following:
- Mergers and acquisitions, including merger, stock sale and asset sale transactions
- Exit preparation, including due diligence preparation and organization, and creation and maintenance of virtual due diligence rooms
- Investment banker engagement agreements, including negotiation, revision and execution
- Term sheets and letters of intent
- Ability to negotiate and draft complex earnouts or milestone payments
- Coordinate and run the M&A transaction from start to close
- Preparation, review and negotiation of deal agreements, including Agreements and Plan of Merger (or Stock Purchase Agreements or Asset Purchase Agreements), Non-Competition Agreements, Employment Agreements, and various related transaction and closing documents
- Coordinate due diligence, and preparation, negotiation and revision of Schedules of Exception for the principal deal agreement
- Coordinate closing mechanics and logistics
Schedule a Consultation Today
We have taken various biotech startups from beginning to end, in other words from incorporation to sale, with significant funding rounds and commercial deals along the way. It’s our business model to help biotech startups from start to finish.
We welcome the opportunity to discuss with you your plans and how we can help your biotech company succeed.