Leonhardt Launchpads by Cal-X Stars Business Accelerator: The Basic Legal Terms Summary

Startups or innovation assets being developet and their ownership groups agree to abide by all these legal terms and conditions upon application and entry to Leonhardt’s Launchpads by Cal-X Stats Business Accelerator, Inc. program.  The start date of these legal terms binding are upon mutual recognization that they are in the current accelerator portfolio class which is determined to occur on the day they are first listed on the accelerator web site portfolio page and the appropriate controlling ownership parties are notified of this posting thus upon receipt without objection presumed to be acknowledging full binding participation in the accelerator program.

The Core Economics

  • Equity – In exchange for participation, the accelerator receives a 9% seed stage ownership interest in the company or innovation asset.  On the same terms as other founders.  If the company or asset should ever offer preferred stock with preferred terms the accelerator has the right to receive the best terms offered to any other investor. Any accelerator held common stock will be converted to preferred stock upon request in such instance
  • Additional $ Investment –  The accelerator has pre-emptive right to purchase up to 20% equity in the asset or company right up to exit or graduation.

Note – In special cases some startups or innovation asset platforms under development may be accepted into the accelerator under cash pay only terms without equity.  This has to be approved up front in clear writing otherwise the equity provisions are presumed to be in full effect.

Other Important Details –
Period of Acceleration – Through first in human studies of a near final product expected to go to market.
Accelerator Services –  Accelerator is obligated to provide only mentorship and guidance for its minority  9% equity position and in-direct or direct cash support to acquire an additional 11% equity to reach 20% total equity position.  Any other support services or products provided must be paid for by the startup or asset development team in cash, when cash is available to pay, or in additional equity shares if the accelerator agrees to non-cash payment.  If the startup or asset development team is short on cash and unable to pay due bills the accelerator holds the right to take up to a max cap of 18% of their incoming cash to cover service billings, debts or reimbursements to the accelerator.
Representations: Accelerator requires founders to make accurate and truthful representations in their agreements; meaning that the founders are committing themselves, by contract, to the truthfulness of those representations.  The Accelerators can bring suit if it turns out those representations are wrong.
  • Organization –  Leonhardt’s Launchpads by Cal-X Stars Business Accelerator, Inc. is a California C corporation founded in 2008 and incorporated in 2013 majority controlled by Leonhardt Ventures LLC formed in 1982 and formed into an California LLC in 2005.
  • Capitalization – Accelerator requires you to state accurately in the contract what your capitalization is, including how much total equity is outstanding, how much the founders own, the size of your option plan, etc.  Given the accelerator expects to own X% of your Company or Asset upon entering the program, there’s no way they can be sure of that without knowing what your cap table looks like.
  • Authorization – The innovation asset or startup entering the accelerator certifies that the person signing or agreeing to terms and conditions and corresponding documents being executed in connection with the accelerator acceptance is authorized to do so, .
  • IP Ownership – All innovation asset development teams and startups entering the accelerator understand that they own the controlling rights for their specific application of use and purpose.  But if the same IP is applicable to another startup or innovation development team in the accelerator in the same portfolio class during the acceleration period that any IP that may benefit their separate specific application of use or purpose is automatically licensed to them on an exclusive basis with no fees or royalties and vice versa.  After an asset development team or startup exits the accelerator any new IP only belongs to them and there is no requirement to provide fee or royalty free license to any new IP to fellow accelerator portfolio members.  The accelerator and its parent Leonhardt Ventures LLC agree to license free of fees or royalties on an exclusive basis for their specific application of use or purpose of their candidate first product or product line (cannot be an overly broad application of use) an IP it holds or develops during the acceleration period in exchange for their non-dilutive equity positions.  If the non-dilutive covenant is broken, even if voluntarily, the startup or asset development team then has to compensate the accelerator and/or Leonhardt Ventures LLC market rates for an exclusive IP license for their application of use.  The market rate will be determined by a Leonhardt Ventures LLC provided patent licensing expert or attorney and an independent appraiser assigned by the startup or asset development team.
  • Vesting Schedule for Founders – For other than the original inventor and founder(s) of a technology all other members recruited to startup or asset development teams should have their stock options on a vesting schedule. New accelerator or Leonhardt Ventures LLC IP developed after the startup or asset has exited or graduated from the accelerator does not apply.
Covenants –  
  • Information Rights – Accelerator is an investor, and expects to stay informed of material events in the Company’s trajectory.  This often includes (i) financings, (ii) acquisition offers, and (iii) periodic financial reports of the startups or asset development team’s performance.
  • Anti-Dilution Rights – Accelerator has a bottom floor at 9% on dilution of its equity.
  • Approval Rights – Accelerator requires you to obtain their written consent in order to enter into certain key transactions, including (i) selling the Company or key assets, or (ii) issuing securities to employees or founders through an option plan not already approved at the time that the accelerator docs are signed.
  • Preemptive Rights – In addition to anti-dilution rights, which protect the accelerator from dilutive issuances, accelerator has preemptive rights (pro-rata rights) to purchase their pro-rata share in any future financings. Meaning that the 9% they own now, they can take 9% of your future financings, as long as they’re willing to pay whatever price is set in that round.  They also have the pre-emptive right to acquire up to 20% ownership right up to exit or graduation at the prevailing market price of the last true needed financing round completed prior to exit or graduation (an artificial not needed found simply to raise the purchase price is not accepted).
  • Investment Rights – Accelerator has right to purchase up to 20% equity ownership interest in the startup or asset right up to exit or graduation at market price per unit share prevailing at the time paid by other investors in the last complete needed financing round.