U.S. venture capital fund Revolution Ventures plans to open a Beijing office "soon," according to Reuters. The VC company wants to focus on the education and learning sectors in China and…

The $586 billion stimulus package Beijing announced Sunday was a flop with the markets, at least. Seeking Alpha estimates that the effect of the stimulus package on the stock markets in China…

China Economic Review is reporting that Shanghai's Pudong district is going to get its own venture capital firm. A government sponsored investment fund worth almost $300 million is going to focus…

Preparing for Startup Empire this week? It’s important to come away from these things not only with an informed view of what your investors want, but with a view to the potential pitfalls of those requirements. You’ll save yourself a lot of time if you develop your own view of what terms are acceptable risks for you to take with an investor, and what terms need some adjustment. Take, for example, term sheets, and preferred shares versus debentures. As you listen to the presentation on this, I want you to keep in mind a few things:

1. In the current environment, everything is relative. The investment you get in may be the only source of ready cash you see for the next two years. As a captive investee, you therefore need to carefully consider how the balanced control provisions your investors request are.

2. A convertible debenture financing now perhaps a more dangerous instrument than before, since it can place significant control in the hands of the lender. Debt holders have rights that shareholders don’t – they can call their loan and request their money back. This means that a debenture holder can shut you down if you don’t have the cash to pay them and they want out.

3. In Canada, most VCs (and some angels) will insist that a debenture be secured. This allows the investor to take certain actions upon non-payment of the loan. This means that if there is a default, the investor may take possession of and sell the your business’ assets and apply the proceeds to the repay the debt.

4. A VC will tell you it would be irrational for them to actually do this, as the return would be pennies, and that’s logical in most cases. HOWEVER, there are several scenarios when an investor may decide it wants any remaining cash back from the business.

5. One way to mitigate these risks is to pay very close detail to the “boilerplate” language in the security agreement you’re asked to sign. Make sure the events of default are narrowly tailored – they should NOT include insolvency or other standard items that make it easy for the debenture holder to trigger repayment. This is the same conversation you have with any investor, but in a different language (the language of debt) – make sure you have it.

6. Related, but different point: increasing numbers of US resident angels and friends and family are joining rounds of investment here. There are a few implications to keep in mind:

- US residents are typically taxed on conversion of debentures to shares if part of the amount converted is interest. Interest-bearing debentures need to be altered to debentures plus warrants (one example) to provide the same risk of return.

- even if your US investor wishes inerest, usury laws in some states (including California) limit the amount of interest that can be charged on a debenture to rates well below norms up here (depending on size of debenture and size of investor)

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Jeff Stewart needed that done yesterday. Jeff became an entrepreneur when he founded the web consultancy Square Earth in 1995. Only three years later he became a serial entrepreneur by starting Mimeo, a service that lets you send a file directly from your computer to be printed, bound and shipped overnight. Mimeo struggled in the dot com crash of 2000-2001 just as it was getting off the ground. Jeff was able to pull Mimeo though the downturn despite almost running out of cash, which has allowed the company to flourish and make $55.4 million in 2007 revenues. Ironically, Jeff didn't have the same success in good economic times with ample cash after he raised $20 million for Monitor110. He discusses the company's shutdown and lessons learned. Now Jeff's focused on allowing businesses to hire good salespeople faster with Urgent Career. He announces on this show for the first time that he's just raised a six-figure angel round to speed up Urgent Career's success.

In what has to be the oddest piece of reporting on the high-tech scene I’ve seen in a while, this morning’s Ottawa Business Journal breathlessly reported details of the receivership of Celtic House portfolio company Trialstat. The piece – and again, I remind you this is on the front page of the on-line edition – sets out amounts owing line by line to insurance brokers,lawyers and accountants. Is there really so little to report on the Ottawa scene that a summary of a court filing appointing a receiver merits front page coverage?

If you are going to write about a receivership like this, here are some points to consider mentioning:

1. A receiver is appointed to take possession of the assets of a business on behalf of secured creditors, pay out priority claims (employee wages) and distribute the remainder to the secured creditors. Privately-appointed receivership effectively places the assets and the business in the hands of its secured creditors, and out of the hands of management.

2. If, however, a receiver is appointed by the courts, this can signal potential conflicts among creditors. It also (in theory) reduces the lenders’ ability to control the sale of assets of the business, since these steps are now subject to court scrutiny.

3. With many start-ups there are often not enough receivables or commercializable IP to bother with the expense of a receiver, court-appointed or not. Here, the story might be different. One could speculate that Celtic House, with its track record for incubating its own companies, might be seizing the ip for its own for future re-development. An alternate thought: conventional wisdom has it that SAAS model businesses are unlikely to be completely shut down – if there’s service revenue with margin, the saying goes, there’s probably a buyer for the service. Receivership may be a way to complete a sale of the business with maximum returns to the lenders (BDC and Celtic House) – unsecured creditors and shareholders are cut out of the process.

4. Jonathan Barker, a prince of a guy, was one of the first Ottawa-area entrepreneurs to build a business based on a SAAS delivery model. It will be interesting to see where he and his team go next.

PEHub reported last week on the growing investment in education that private equity firms seem to be making in Asia. Because of the value that Asian society places on education, the sector is seen by…

A number of news sources (International Herald Tribune, Bloomberg, the WSJ) are reporting that China has unveiled $586 billion stimulus package that it hopes will bolster domestic demand and help…

Now stop staring at me and lend me your lip balm.

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