Adam Torres and Steve Masur discuss venture financing.
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Show Notes:
Technology venture financing has had many changes through the years including direct investment, convertible notes, SAFEs, SAFTS, and now digital asset Fair Launches. In this episode, Adam Torres and Steve Masur, Partner, Chair, Technology and Ventures Practice Group at Raines Feldman Littrell LLP, explore the evolution of venture financing.
About Steve Masur
Steven Masur has over 30 years of experience advising early, growth and enterprise stage companies in emerging industries. Steve brings a unique mix of legal, business, and strategic experience to bear on client matters and is passionate about helping committed teams execute upon a path to success in new markets. Steve has been an early innovator in internet, software, entertainment, games, and mobile technologies, and has most recently focused on blockchain, cryptocurrencies, DAOs, defi, and cannabis.
Steve’s practice disciplines include corporate and commercial deals, intellectual property, local and international regulatory issues, and strategic guidance. Steve has extensive experience in venture capital finance, mergers and acquisitions, joint ventures, strategic and cross-border transactions. He has counseled a wide variety of enterprise level clients including Shazam, Virgin Mobile, Liberty Media, Yamaha, Diageo, Nielsen Buzzmetrics, Warner Music Group, Bob Vila and Conde Nast Publications. He has also helped emerging businesses in a wide variety of sectors, and is especially knowledgeable in media, entertainment, advertising, consumer products, food and beverages, and technology including mobile, games, digital music, social media, augmented and virtual reality, blockchain, cryptocurrency and cannabis.
Steve has been recognized as a “Rising Star” and a “Super Lawyer” and serves on a variety of corporate and nonprofit boards and industry associations. He regularly lectures and writes about major issues in technology, venture capital, emerging industries, blockchain, cryptocurrency, DAOs, defi, and cannabis. regulation.
About Raines Feldman Littrell LLP
A team of highly experienced transactional and litigation attorneys from some of the nation’s most elite law firms.
Working in an innovative and collaborative environment, they draw on their years of high-profile litigation victories and ground-breaking business transactions to provide creative and forceful representation. They temper exacting legal scholarship and fierce advocacy with common sense and a deep understanding of business realities.
Based in Los Angeles, their practice extends nationally and internationally. They represent and advise individuals, privately held companies, and public companies.Their clients are leaders in the areas of real estate, finance, entertainment, new media, fashion, technology, sports, hospitality and consumer products.
They are deeply committed to their community and public service. Their lawyers serve on boards of community organizations, volunteer their time with local non-profits and political campaigns and lead bar activities.
They compete at the highest levels and do it more quickly, efficiently and effectively than “big law.”
Ultimately, they solve problems so their clients can create, innovate and thrive.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to missionmatters. com and click on Be Our Guest to Apply. All right, so today I have Steve Massur on the line, and he is Partner Chair in Technology and Venture Practice Group over at Rains Feldman Littrell LLP.
welcome to the show. Hi, Adam. Thanks so much. I’m excited to be on the show and and talk about a few of the exciting things that we’ve been working on recently. All right. Yeah. Great to finally get you on here. And I know that you were referred over to us from Phil and Charlie over at D. C.
And I know that you’re going to be going to the reg a and crowdfunding conference coming up. So first off, have you ever been to a deal flow event or one of these conferences, man, I was kind of bummed. I couldn’t go, but I got to hit the next one. This is the first time for me, so I’m excited to check it out.
It’s at the Westchester Country Club which I haven’t been to. I’ve been to the Yacht Clubs in that region because I like to sail, but I haven’t been to the Country Club, so I’m, I’m expecting it’ll be pretty nice, and I’m really excited to talk about the reggae and crowdfunding topic because it’s a very quickly growing area in financing.
Yeah. And you I guess , you’re going to be correct me if I’m wrong, you’re going to be on a panel and, , what’s just to give us a little bit of a flavor for that. What, is the panel going to be on? Well, it’s interesting. The panel is called the evolution of reggae financings, and it’s at the very end of the day, which, you know, not the greatest time slot, but we’re going to make it really exciting.
You know, I see these things as. As very similar. It’s really a performance. And , you got to make it fun for people. And that’s the way that it, , people learn the most and the way you get more out of the way. I’ll get more out of it as well. So that’s what we’re going to do on this panel.
We’re going to talk about all the new stuff that’s happening. In this area, including in the digital assets space there’s quite a lot happening with regard to digital assets, the companies that started with their, , licensure process five years ago in the bull market of twenty eighteen, the crypto bull market of twenty eighteen were sort of laughed at then and now they’re launching and doing some really interesting offerings.
So who’s laughing now?, I want to go further into that and kind of this evolution also, in financing deals, but maybe just to get us started, let’s go a little bit further back in your career. Like, long have you been practicing and kind of in this niche? I’m glad you asked that question.
I started working in venture capital and venture financings in the early 1990s at the very beginning of the, , first, we call it the first internet cycle or web one. So that’s my context. Yeah, I was, I was about to say 1990, so that’s like, take, take us back for a moment. Like, this is like, these, these phones we’re looking at, like, and none of this stuff existed, right?
For the youngins that are listening too. And it’s, it’s been a really exciting run for me. I mean, I thought the internet was the biggest thing I would ever see in my lifetime. Wow. So I was like I was like a crusader on the crusades. , I was having a lot of fun with it. It was very creative. We came up with digital downloading for music and films.
We came up with the online advertising models that most people use today. And you mentioned mobile phones. I mean, what a game changer. We, we did a lot of work in the mobile phone area. And my vector into that was actually ringtones and wallpapers, Was , it’s one of those things like when dinosaurs roamed the earth it was a huge market.
We sold companies in the, , hundreds of millions of dollars and people don’t even remember any of it because the iPhone essentially wiped all of that off the map. Yeah, that’s the days of the ringtone cost. It cost money for a ringtone. I remember and it would be like a minute for us to get that to happen.
We went, we, we went to the brand first and had them pay for the ringtones. And then after, after the product took fire, people were willing to pay for it. Where were you located? Like, what coast? Are we in New York? LA? Like, where was all this taking place? I’m just curious. New York City and it was really,, , one of the most Man, that must have been amazing to be in New York during that time period.
Like, what’s going on? It was because New York itself was was coming from a pretty low place and it was yeah, it was, , the moment of, , Giuliani and Bloomberg and the rebuilding of New York. And it was also a very global market. The, the ringtone market was global and , the, the dot com market was not really global.
It was sort of. Located in San Francisco and like just a few tech hubs and New York was a really small tech hub at the time So it was a tiny business in a big city Yeah, it’s so interesting and i’m glad you share that steve because as we kind of get further in this discussion I just wanted to set the tone for your actual like background And like what you’ve seen because I think Your vantage point is pretty unique.
There’s not too many people that have been working in the same field and building this, you know, from the early nineties , that are still in the game, number one, but that are also seeing the evolution, which I think, and I’ll say this gives a give may give you a little bit more insight into what’s going to happen next as well.
So that, that becomes interesting. I’d like to contextualize it with some insights from Fred Wilson. Fred Wilson’s one of the. , more prolific and most successful venture capitalists of the era. And he was New York based at the same time and came up at the same time as me. And, , it was, you know, the way he puts it into context is to say that, The, the venture world of Silicon Valley started way back in the fifties with Hewlett Packard and had 40 years to develop to that point.
And so, New York didn’t really start until the internet. So if you look at it in terms of a timeline, what you see in Silicon Valley, you see New York on track for becoming something that size. New York, I think, is the second or probably the second largest venture market in the country. And , the other venture markets are following behind on that same track.
And , it’s really good to see it in that evolutionary context. Hmm. let’s get into into financing deals a bit here. So what do you see in present day? , what does it take to make a deal happen? Boy, it’s interesting. You know, the SEC came out with the accredited investor rules, mm-Hmm.
around when I was getting started in the nineties. And they essentially cut off normal Americans on the street from the biggest you know, wealth generation event in US history. Mm-Hmm. by making it impossible for anybody who is not an accredited investor to invest. And we’ve been trying to unwind that for about 10 years and that’s where the reggae and crowdfunding rules find their genesis is in an attempt to sort of bring equity wealth creation back to the masses.
So it’s really, , important work if you ask me to really help normal Americans achieve some of the numbers that we’ve seen some of the tech giants achieve. Yeah. Yeah. And maybe speak to it a little bit from , the company standpoint too, and just ability to raise money.
Oh, , it’s so much easier to raise money now. If you go back to my genesis in the early 1990s Just so many of the modalities through which we raise money now didn’t even exist. The venture capital business didn’t really exist in New York in the early 1990s. You know, at the very earliest days I was working for the Newhouse family and people would, Would just come around.
People like Ted Turner with CNN would come around and pitch the new houses on getting investment. And that was pretty much the only way that you could get investment was to find, , somebody, a public company, a family office that had money and get investment directly from them. But , in the intervening 30 years, what’s happened is Series A financing, Series ABC that we see from Silicon Valley after the tech crash in 2000 , we, meaning the venture community, created the convertible note, which is basically a way for investors to have their cake and eat it too by , the companies and this is company, We’re basically saying, well, look, I don’t really care , if this company doesn’t work, I’m just going to quit and start something different.
So I don’t really care if they own my company. So as venturers, we took that insight and said, well, in that case, we can give the investors everything. We’ll give them debt. Where they can foreclose and take the company assets if they want to just anything to sort of overcome their objections to investing in these companies in a post crash circumstance.
So that’s where the convertible note came from. And of course, convertible notes led to safe agreements from Y Combinator who invented that modality and then SAFT agreements which is Sale of future token agreement , for the crypto era. And now we have this thing called a fair launch, which is really interesting.
But the aggregate effect of that, Adam, is that anybody can get financing pretty much. You basically, you just need a good idea. And frankly, you need to build on it. Back in the day, you could go around with a piece of paper and raise money. That’s gone. You have to, you have to have something, but if you have something, you’re going to get financing.
Yeah. I think those were interesting days when you had a deck and an idea and if you could sell it like that, those were interesting. I didn’t come up in those days, Steve. So I hear them, but it’s, it’s pretty mythical to me. I’m like, what, huh? You, you could just, well, you know, the past repeats.
So if you look at the AI market right now these are companies that are very nascent and have very sketchy business models, if any you know, so it’s very similar to the dot com era. Yeah, good point. And speaking of AI or, or just tech in general , what are you watching right now?
Like, what are you watching? Whether it’s, you know, streaming media, like what, what are you watching? I’m watching digital assets this is you know, when I said earlier that I thought the Internet was the biggest thing I would see invented during my lifetime I was wrong. Really, digital assets are the biggest thing and digital assets are very much a part of the Internet, so it’s almost like saying the same thing.
Web 1 was the ability to read. Meaning, you know, normal people couldn’t code, so you had to just read what other people coded. Web 2 was the ability for normal people to actually self publish. You know, sites like Twitter and YouTube. And then Web 3, which includes digital assets, but it’s not Only digital assets is really digital uniqueness and the ability to do transactions on the Internet.
And broadly speaking, that encompasses all of banking and all of transactions. So to me, that’s the biggest news and the thing to watch. AI is very important, but AI to me is similar to the Google revolution, which was a revolution of one company AI is not something that’s really available as an entrepreneurial objective to normal people.
You pretty much have to be open AI or Microsoft or Google. And the only counterpoint to that is a company called Morpheus, which is an open source version of that. And I would analogize that to Linux you know, OSX. DOS and Linux, that whole war, where Linux was the only open source component to it, and Linux, of course, won.
So I’m watching Morpheus pretty closely, because it’s the only open source AI, and, a lot of people think that it’ll probably win in the end. And the end is 10 years from now, yeah, go a step further on the digital assets side of things. Cause , I want people to get this and I want, I don’t want to assume that everybody like understands what it means in the important.
So , maybe define digital assets and give us some context for that and why it’s so important. Okay, it’s very interesting. , the best way to do it is just to speak in terms of the products that we use. So if you are a, if you are a immigrant in America working on the streets in New York selling hot dogs, for example and you want to send your money back to your home country or I should say your former home country , you are going to pay between 20 it’s going to take 2 or 3 days, which in a digital world is pretty ridiculous.
And what digital assets do is they make that instantaneous and close to free. Not free, but close to free. It’s very much based on capitalism. Gas fees and digital assets do is they also one way to put it is they remove fraud , because you can identify the chain of title and because the chain of title is transparent and immutable.
It’s really hard for there to be fraud. And fraud, of course to segue is one of the biggest concerns in digital assets and the thing that most people think digital assets are fraud. And the reality is that there’s fraud in all financial products and all financial markets. And if you don’t regulate it.
Then fraud’s what you’re going to get. And so that’s what you’ve seen in digital assets, which we’ve chosen not to regulate in the last 10 years. Yeah. And then thinking about also the world economy , for countries , and populations that went mobile first, right? So the ability , for people to move money that don’t have, didn’t have access to other ways other than their phone, So now when you think about like entire generations in certain areas that are being raised , on that concept, like that becomes interesting over time.
Doesn’t it? Like that, to me, that’s definitely definitely an invisible revolution to us. Yeah. Yeah. , this is an invisible revolution to us, but it’s not invisible if you live in El Salvador or Argentina. Not invisible at all. If you’re watching , your wealth , in your country’s cash diminish in the double digit percentages, then , you have a big incentive to move , your wealth into digital assets.
And so a lot of people have done that. Yeah, yeah, that’s in the U. S., in the U. S., the dollar works just fine, and so we’re sheltered, we’re sheltered from it, for sure. Yes. We’re sheltered from it, and then the day to day, but I, I look at, like, over time, what, what some of the implications of that could be, and it’s like, wow, you’re, you’re really taking the power back in your banking, and so what happens?
Yeah, we, we have a 20 percent interest rate here. But these days, people are crying about a 5 percent interest rate. You know, it’s pretty ridiculous. Our problems are not big problems on a world level. Yeah. Well, Steve this has been great having you on the show today. And I’m like, we, there’s so many different ways we could go at this, but we’re about out of time , at our episode today.
But that being said, I know we just scratched the surface. If somebody wants to learn more about what you’re doing over at rains, Feldman and Latrell LLP, I mean, what, , or connect, what’s the best way for them to do that? I am very easy to find. You can search on my name , on Google Steve Besour.
Reinsfeldman is at Reinslaw. com, R A I N E S law. com. And my socials are usually my last name, which is at M A S U R. And my email address, which I’m happy to share, is S M A S U R at R A I N E S law. com. law. com Amazing and for everybody listening, we’ll put the link to the website in the show notes so you can just click on the link and head right on over and Speaking of the audience if this is your first time with mission matters And you haven’t done it yet.
Feel free to hit that subscribe or follow button This is a daily show each and every day. We’re bringing you new guests, new thought leaders, new ideas, and hopefully new inspiration to help you along in your journey as well. That’s what we’re all about is growth. Again, hit that subscribe button and Steve, thank you so much for coming on the show and, best of luck at the conference.
I know you’re going to knock it out of the park. So thanks again. Thank you, Adam. This was so much fun. I really appreciate it. Talk to you soon.