Legal Practice Areas in Germany

The term "Venture Capital“ describes an equity or equity-like financing granted to (typically young, often “start up”) businesses with a high growth potential but yet little or no access to public capital markets or debt financing. Venture capital investors typically receive in return for their venture capital investment a minority stake in the target company’s share capital that is issued to the venture capital investor from a share capital increase. To protect such investment and the position of the investor as a minority shareholder in the target company, a number of typical features of venture capital terms have evolved, such as proceeds preferences, dilution protection, consent requirements, rights of first refusal, and tag along rights, as well as drag along rights. Depending on the development stage of the target company, its founders – who typically also manage the business of the target company – are often subjected to a reverse vesting in respect of their shares, i.e., to a mechanism, by which they release all or part of their shareholding in case they cease early to work for the target.

Venture capital lawyers advise venture capital investors, target companies, or founders on the structuring, negotiation, conclusion, and implementation of the agreements and corporate documents underlying venture capital investments. In addition, they typically advise on a number of legal transactions, which arise in the context of venture capital investments or in general in respect of venture capital financed businesses, such as stock option or virtual incentive schemes, bridge financings (e.g., by way of convertible loans), exit transactions (e.g., share sales or asset sales of the target company), as well as other M&A transactions involving venture capital financed businesses.

Furthermore, law firms that focus on venture capital typically offer legal advice on a variety of operational legal issues of target companies. Given the main business areas, which attract venture capital, namely Internet, software, mobile applications, life sciences, and clean technology, such operational issues include, for example, intellectual property transactions, data protection, other regulatory issues, as well as general terms and conditions.