In the evening of June 3, we had the chance to sit down with Michelle, one of the busiest lawyers in town dealing with tech startups, and get her update on issues about which cleantech startups should be aware. She did a really good job. In case you missed it, you can view the entire session on our YouTube channel. Here are some highlights:

  • There is a lot of investment interest right now and it is pushing valuations higher.  In one particular case, a valuation was likely 35-40% higher than it would have been a year ago.
  • The pace of mergers and acquisitions during the pandemic didn’t really slow down and now it is increasing.
  • The biggest mistake small companies are making is still in the allocation of equity to early employees.  Care should be taken in choosing the right amount of equity (founders often are too generous and unaware of the consequences that will come up later), giving it out all at once (rather than letting it vest over time, often three years) to give a chance to see whether the individual really deserves it, and assuming that shares can substitute for a cash payment.  Under California law, there is a minimum that an employee must be paid and that minimum cannot be waived by the employee.
  • Special Purpose Acquisition Company (SPAC) transactions are getting a lot of attention now, but they are not really appropriate for early-stage companies.  They are for companies with substantial revenue either profitable now or close to being profitable.  They result in becoming a public company and accordingly will create a cost of $1-3 million per year in meeting reporting and audit requirements.
  • Crowdfunding is enjoying a resurgence as the SEC loosens its restrictions, but it is still a perilous path to follow.  Companies can inadvertently become public companies by acquiring too many shareholders, for example.  And small investors that are not accredited (meaning they have the money to spare) can be very litigious if things go poorly for a company.  There are some structures which may mitigate some of these risks, but will not eliminate them.
  • Convertible notes remain an attractive structure for initial investments, but there should be some kind of deadline when the notes convert if a subsequent financing does not occur which would trigger the conversion. The SAFE contracts have been popular, but the original SAFE language did not have the safeguard on conversion.  As a consequence the note holder could be locked-into a company for an indefinite period.

Michelle also stressed the importance of getting a periodic “health check” from your legal team just to be sure nothing is lurking in the shadows that will cause problems in a transaction, in a fundraising, or in operating your business. She can be contacted at

Thomas Hall


Gary Simon is the Chair of CleanStart's Board. A seasoned energy executive and entrepreneur with 45 years of experience in business, government, and non-profits.

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