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palmer_md
Member
Its $100/share 50 share minimum. Contact LPP for an investment package for additional information.
StapleGun
Member
pz1975
Active Member
I invested as a Canadian and there were no hoops. I read and signed some documents, got them notarized (I guess that's a small hoop), sent them and then wired the funds. I received a confirmation email and then a few weeks later the shares certificate. Pretty easy actually.
I, too, am buying a Lppttery ticket (tm). I fully expect to lose the money. But, if I win, I will win big. And if I help stimulate research in a direction that finally achieves fusion power, I will have done my bit to save the world, even if LPP isn't the right path to get there.
For those invested in LLP, I'm wondering:
How much previous investment has LLP received?
At what company valuation are they giving out the shares you've invested at?
Finally, it sounds strange that they would sell shares to many small investors as a private company.
Limiting the Number of Shareholders in Private Companies - Gust BlogGust Blog
I'm not trying to dissuade anyone but just trying to aid in due diligence.
It's all spelled out in detail in the investment document. However being a private placement, the document is confidential. But they'll happily send it to you. Or if you happen to drop in, a copy might be lying around on my coffee table or something ;-).
Alternative Energy Investor Discussions (formerly SCTY thread)
Also regarding LLP, make sure there are strong anti-dilusion provisions if you become a shareholder. There are various methods institutional venture capitalists can use if/when they join in later on to wipe out earlier shareholders. They usually don't like to see a lot of small "friends and family" type of investors with small amounts of capital invested but not employed by the company. It's very suspicious that LLP is accepting shareholders with as little as $5k investment. Having a lot of small non-involved investors in the company does not look good to VCs later on and they will be tempted to wipe out these small non-involved investors, especially if there are a lot of them. Meaning, even if LLP makes it big it's possible you could be left with nothing.
Further, since it appears LLP won't be monetizing their product anytime soon (it will take years), they will likely be needing to do many rounds to raise funds in the future. With each round, it will become increasingly suspicious and annoying for sophisticated investors to see a ton of small non-involved shareholders. This could mean less employees LLP can offer stock options to and overall could hamper the company long-term. Another reason for sophisticated investors in later rounds to try to wipe out the small $5-25k shareholder.
Here's one method described by Paul Graham (of Y Combinator): (How to Be an Angel Investor)
[4] These anti-dilution provisions also protect you against tricks like a later investor trying to steal the company by doing another round that values the company at $1. If you have a competent startup lawyer handle the deal for you, you should be protected against such tricks initially. But it could become a problem later. If a big VC firm wants to invest in the startup after you, they may try to make you take out your anti-dilution protections. And if they do the startup will be pressuring you to agree. They'll tell you that if you don't, you're going to kill their deal with the VC. I recommend you solve this problem by having a gentlemen's agreement with the founders: agree with them in advance that you're not going to give up your anti-dilution protections. Then it's up to them to tell VCs early on.
The reason you don't want to give them up is the following scenario. The VCs recapitalize the company, meaning they give it additional funding at a pre-money valuation of zero. This wipes out the existing shareholders, including both you and the founders. They then grant the founders lots of options, because they need them to stay around, but you get nothing.
Obviously this is not a nice thing to do. It doesn't happen often. Brand-name VCs wouldn't recapitalize a company just to steal a few percent from an angel. But there's a continuum here. A less upstanding, lower-tier VC might be tempted to do it to steal a big chunk of stock.
I'm not saying you should always absolutely refuse to give up your anti-dilution protections. Everything is a negotiation. If you're part of a powerful syndicate, you might be able to give up legal protections and rely on social ones. If you invest in a deal led by a big angel like Ron Conway, for example, you're pretty well protected against being mistreated, because any VC would think twice before crossing him. This kind of protection is one of the reasons angels like to invest in syndicates.
Another method is at a later round, under pressure from VCs, the company could issue arbitrary amounts of stock to effectively wipe out earlier non-involved stockholders.
Also regarding LLP, make sure there are strong anti-dilusion provisions if you become a shareholder. There are various methods institutional venture capitalists can use if/when they join in later on to wipe out earlier shareholders. They usually don't like to see a lot of small "friends and family" type of investors with small amounts of capital invested but not employed by the company. It's very suspicious that LLP is accepting shareholders with as little as $5k investment. Having a lot of small non-involved investors in the company does not look good to VCs later on and they will be tempted to wipe out these small non-involved investors, especially if there are a lot of them. Meaning, even if LLP makes it big it's possible you could be left with nothing.
Further, since it appears LLP won't be monetizing their product anytime soon (it will take years), they will likely be needing to do many rounds to raise funds in the future. With each round, it will become increasingly suspicious and annoying for sophisticated investors to see a ton of small non-involved shareholders. This could mean less employees LLP can offer stock options to and overall could hamper the company long-term. Another reason for sophisticated investors in later rounds to try to wipe out the small $5-25k shareholder.
Here's one method described by Paul Graham (of Y Combinator): (How to Be an Angel Investor)
[4] These anti-dilution provisions also protect you against tricks like a later investor trying to steal the company by doing another round that values the company at $1. If you have a competent startup lawyer handle the deal for you, you should be protected against such tricks initially. But it could become a problem later. If a big VC firm wants to invest in the startup after you, they may try to make you take out your anti-dilution protections. And if they do the startup will be pressuring you to agree. They'll tell you that if you don't, you're going to kill their deal with the VC. I recommend you solve this problem by having a gentlemen's agreement with the founders: agree with them in advance that you're not going to give up your anti-dilution protections. Then it's up to them to tell VCs early on.
The reason you don't want to give them up is the following scenario. The VCs recapitalize the company, meaning they give it additional funding at a pre-money valuation of zero. This wipes out the existing shareholders, including both you and the founders. They then grant the founders lots of options, because they need them to stay around, but you get nothing.
Obviously this is not a nice thing to do. It doesn't happen often. Brand-name VCs wouldn't recapitalize a company just to steal a few percent from an angel. But there's a continuum here. A less upstanding, lower-tier VC might be tempted to do it to steal a big chunk of stock.
I'm not saying you should always absolutely refuse to give up your anti-dilution protections. Everything is a negotiation. If you're part of a powerful syndicate, you might be able to give up legal protections and rely on social ones. If you invest in a deal led by a big angel like Ron Conway, for example, you're pretty well protected against being mistreated, because any VC would think twice before crossing him. This kind of protection is one of the reasons angels like to invest in syndicates.
Another method is at a later round, under pressure from VCs, the company could issue arbitrary amounts of stock to effectively wipe out earlier non-involved stockholders.
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My understanding is that we investors can publicly share any information in the private placement document, but LPP can't without violating SEC rules against "general solicitation." However, as ggr said, the best way to get the information is to ask LPP for it. All it takes is an email to Bob Fitzgerald ([email protected]) and there's no obligation.
As stated in my article, approximately $3M.
Currently $100 per share. Planned increases are described here: Investors
Not strange if you know their history.
One of LPP's major investors (over $1M) is the Abell Foundation of Baltimore, MD. They made sure LPP's Shareholder Agreement contains anti-dilution provisions. No venture capitalist will wipe out earlier shareholders, because LPP sells only nonvoting shares. Eric Lerner owns all the voting shares, and he will not do anything to jeopardize LPP or its shareholders. If/When LPP achieves fusion ignition, VCs will be breaking down LPP's door. If Eric doesn't like the terms offered by one VC, he will tell them to go jump and 100 others will compete to take their place.
As stated in the TCI discussion thread about my article, LPP does not plan to become a huge manufacturer with many employees. They plan to license their technology nonexclusively to huge manufacturers, who will compete to gain market share and thus rapidly bring fusion power to the world.
Dave, I appreciate your many helpful posts in the past, but I wish you would educate yourself more about LPP before scaring away potential investors with information that does not apply to LPP.
Maybe Bob Fitzgerald will post here to address other concerns you may have.
Hmm, so it's not OK to advise other to ask some common-sense questions and it's not ok to post about anti-dilution provisions and the reality of angel investing? If you notice I'm not questioning LPP technology or product as I don't have expertise in that arena and wouldn't add much value. They very well could become a huge, multi-billion dollar company. The questions I brought up were purely common questions I ask when I look at angel investments myself (disclaimer: I've made several angel investments). It appeared that some of the folks here haven't had much experience in angel investing so I was sharing some common-sense advice. My questions really are straightforward and harmless, as they should lead the person posing the question to the right answers.
You posted a link to a very bullish article you wrote about LPP, and that's fine. But there hasn't been much discussion on the risks involved and questions people should be asking while they do their due diligence. My overall tone of advice is that people should do their due diligence and should be asking lots of questions and finding answers. I'm not dissuading anyone from LPP specifically. I'm just highlighting the realities and risks involved in early stage investing.
I appreciated you answering some of the questions I posted. But I think you went too far when you said I'm "scaring away potential investors with information that does not apply to LPP."
I don't want to start an argument nor I don't want this to be taken personally, but could you please disclose your relationship with LPP, it's board, employers, investors? Do you have any relationship with them and any added incentive in bringing more investors to them?
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OK, in the interest of serving this community, I'm also going to chime in briefly here. I think this LPP low-temperature plasma energy fusion thing (I know it's not cold fusion but sounds like it) sounds intriguing and would obviously be awesome if the product ever becomes viable. Due diligence notwithstanding, I would consider investing in such a company. That said, I share DaveT's nervousness around the promotion of investment in any private company via this public forum, especially given this suspicious $5,000 minimum you have shared.
To elaborate, I am a moderately experienced private equity investor and venture capitalist. Because of this, I know that investing in a privately-held company is subject to several very important and relevant SEC regulations, particularly the requirements for Accredited Investors, in addition to the rule regarding a general cap of under 500 shareholders that DaveT already shared. I confess that I too am broadly suspicious of a $5,000 minimum capital contribution in any venture-backed company, but especially one that has purportedly taken on $3million in prior venture capital. Regulation D exemptions are possible, but companies that have been capitalized in the millions of dollars do not usually have the administrative staff necessary to handle taking on large numbers of smaller investors, even if they all do meet the legal definition of an Accredited Investor, subject to verification. There are some innovative ways of investing that at best offer a "democratized" approach like Kickstarter and AngelList, but one must always be careful that one is not circumventing SEC regulations by investing in any company.
I would urge caution here, because given the descriptions you have shared to date, it would seem like two possibilities exist: either the management of this company is unaware of the SEC laws they may be in violation of, or they are knowingly circumventing them. Either possibility is troubling.
Edit: I see that the company's own investor page actually links to the SEC regulations I posted above, though that doesn't mean they are in full compliance. I remain uneasy about this $5,000 minimum. That just seems odd. Success in private equity investing is about maintaining a measure of shareholder power and resistance to dilution as much as it is about the company's actual business performance. It is disingenuous at best to take $5,000 investments from individuals in this structure, and illegal at worst.
I want to make clear that I have absolutely no judgment here on the worthiness of the company as an investment from a product or business standpoint, simply pointing out that I too have been uneasy about the seemingly odd legal framework here.
Disclosure: I meet the SEC definition of an Accredited Investor and have invested in several private companies in this capacity.
To elaborate, I am a moderately experienced private equity investor and venture capitalist. Because of this, I know that investing in a privately-held company is subject to several very important and relevant SEC regulations, particularly the requirements for Accredited Investors, in addition to the rule regarding a general cap of under 500 shareholders that DaveT already shared. I confess that I too am broadly suspicious of a $5,000 minimum capital contribution in any venture-backed company, but especially one that has purportedly taken on $3million in prior venture capital. Regulation D exemptions are possible, but companies that have been capitalized in the millions of dollars do not usually have the administrative staff necessary to handle taking on large numbers of smaller investors, even if they all do meet the legal definition of an Accredited Investor, subject to verification. There are some innovative ways of investing that at best offer a "democratized" approach like Kickstarter and AngelList, but one must always be careful that one is not circumventing SEC regulations by investing in any company.
I would urge caution here, because given the descriptions you have shared to date, it would seem like two possibilities exist: either the management of this company is unaware of the SEC laws they may be in violation of, or they are knowingly circumventing them. Either possibility is troubling.
Edit: I see that the company's own investor page actually links to the SEC regulations I posted above, though that doesn't mean they are in full compliance. I remain uneasy about this $5,000 minimum. That just seems odd. Success in private equity investing is about maintaining a measure of shareholder power and resistance to dilution as much as it is about the company's actual business performance. It is disingenuous at best to take $5,000 investments from individuals in this structure, and illegal at worst.
I want to make clear that I have absolutely no judgment here on the worthiness of the company as an investment from a product or business standpoint, simply pointing out that I too have been uneasy about the seemingly odd legal framework here.
Disclosure: I meet the SEC definition of an Accredited Investor and have invested in several private companies in this capacity.
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No, of course it's okay and appreciated. I expressed my wish that you read the article that I put a lot of effort into crafting, and the discussion threads that already exist, which might answer many of your questions, before you post long and rather alarming warnings about dangers that don't exist in LPP's case.
Probably true. But I notice that the ones who invested said they are prepared to lose all their investment, which is the proper attitude instilled by LPP's "accredited investor" requirement and private placement documents.
The risks involved are extensively described in LPP's Investors page and private placement documents, which investors are required to certify they have read before LPP will take their money.
Maybe so. I've been battling dreadful misinformation about LPP in another thread, but I know your post was different.
No problem. Once again, as stated twice in my article, I am long LPP stock. I have no relationship with its board, employers (it has none), or investors, other than an email acquaintance with some members of the LPP team, and a TMC-forum acquaintance with some people who just invested. I have no financial relationship with LPP other than as an investor. My incentive for bringing LPP more investors is a strong belief in their potential to help the world (and their investors), based on my extensive study of them, and some special training I have (graduate degree in physics and engineering) which many potential investors don't have. I've also studied the history of science and scientific revolutions, which helps me understand how Eric Lerner's genius can go unrecognized for so long by many scientists and investors alike. (Fortunately, that is changing now.)
I wrote my article and the posts about it because my talent is writing. It was the best way I could help.
Any other questions or concerns?
Ok, since it seems like you're open to answer some more questions I'll shoot away:
You say they've raised $3m to date but their website says they've raised $2m. ("Since conducting initial experiments with $300K from NASA's Jet Propulsion Laboratory, LPP has raised over $2M from nearly 40 private investors from around the world, and institutional investment from the Abell Foundation of Baltimore, MD. Accredited US and/or foreign investors can purchase Class B, non-voting shares.", Investors). Is their website just out of date?
Also, when did they raise the $2m (from their website)? Over how many years was the $2m raised? How much money have they raised in 2012? In 2013?
What's their annual expenses (ie., everything inc. salaries) for each of the past 3 years?
How many full-time employees working out of their office do they have? How many full-time employees working remotely do they have? How many part-time employees?
It appears that they're valuing their company at close to $30m (near 300k outstanding shares x $100/share) for this financing round. But then they seem to be saying their book value is $2m. How exactly are they valuing their company and at what valuation?
(Btw, I've read your article, the private placement memorandum from LPP (read it just this afternoon), their 2014 kickoff report, their Oct 2012 presentation, and some more stuff from their website.)
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And just to add -- the valuation should be reported in the offering memorandum, and should be a total amount of value in the company that factors in capital raised and future earnings estimates. The "$100-per share before we hit a milestone" thing is not relevant to valuation.
Here we have another person who apparently did not read my article or anything about LPP before posting negative opinions about the company. I find this irritating.
LPP's "plasma energy fusion thing" is not at all "low-temperature." As stated in my article, the temperature required for hydrogen-boron ignition is 1.6 billion degrees Celsius (hotter than the core of the sun), and LPP has achieved 1.8 billion degrees. Hydrogen-boron fusion has nothing to do with so-called "cold fusion," as I explained here in the other TMC thread:
Eric Lerner of Focus Fusion - Page 2
Flux, I'm glad to see you viewed at least one page of LPP's website, although I would've preferred that you do it before suggesting that LPP is unaware of or breaking the law.
Here's a proposal. Why don't you, "in the interest of serving this community," take the next step and actually investigate whether LPP's fundraising is "disingenuous or illegal" and report back here to the community. You can start with a simple email to the address on that page you viewed.
Are you an accredited investor, Peter? Look, I'm not trying to attack you, just trying to help. I don't understand the technology and defer to you on that. I do understand the law here though and simply hope to help keep you and others out of trouble.
palmer_md
Member
Actually I would like it if DaveT and or FluxCap, or anyone with experience in this type of investing could review the investment package. I've asked for an received a copy, and almost all the questions that were asked in the posts above seem to be answered in the paperwork provided. I'm considering investing, and I'm consulting with friends who have some experience, but would appreciate any other experienced reviewers comments.
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