Digital Media Legal Eagle Flies Between Silicon Valley and LA

Silicon Valley is swarming with tech workers whose medium is the Internet. Southern California abounds with producers of quality content.

So it’s no surprise that T. Hale Boggs, who oversees the new digital media practice group at Manatt Phelps & Phillips, bounces regularly between San Francisco and Los Angeles.

The Washington, D.C., native was drawn west more than three decades ago, enrolling in Stanford University sight unseen. Today he calls Los Angeles home, but his Northern California ties remain strong. Boggs, 50, helped Manatt open offices in Palo Alto in 1998 and in San Francisco in 2007.

A lunch date 15 years ago with one of his old Kappa Alpha fraternity brothers—Tim Draper of Draper Fisher Jurvetson—launched a business relationship that’s still going strong. Boggs represents DFJ’s interests in affiliate funds worldwide, including Russia, China, Brazil and Israel. Three-quarters of Boggs’ practice entails representing VCs.

Boggs recently talked to VCJ about what’s driving special purpose vehicles (SPVs) and where they fit in the VC landscape.


Boggs has been handling an increasing number of SPV financings in the past few years, a trend he doesn’t expect to change. This financing vehicle provides a company heading for an exit with funding to bridge the gap between what it needs to hit that milestone and what its venture backers have provided.

Businesses most likely to secure SPV dollars are IPO candidates or mature candidates positioned for sale to a larger company.  SPVs typically provide businesses with between $1 million to as much as $4 million.

They’re vying with venture, Boggs says, but they aren’t venture funds. The best candidates for SPV funding are social media companies, which can stretch a small infusion of capital, as well as some companies developing consumer products.

SPVs have become a dynamic business model for two of his clients, Lucas Venture Group in Menlo Park and Black Diamond Ventures in Los Angeles. Lucas Venture has been a client for three years; Black Diamond for more than a decade. Black Diamond formed an SPV to invest in a $4.1 million Series B-1 round in the spring for Mogreet Inc, a Venice, Calif.-based mobile marketing provider. Lucas Venture formed an SPV to invest in a $22.5 Series C round for Avinger Inc., a medical device manufacturer in Redwood City, Calif.

“They thought initially SPV funding was a way to stay in the game and continue investing in good opportunities without having to go through the 18-month process of trying to raise money from a broader group of institutional LPs and the like, but they found they like the model a lot,” Boggs says of his SPV clients. “It’s produced some really good returns. So I think they’re going to stay with it.”

Syndicate fans prefer that model to angel investing because it’s a quicker, more nimble way to do a deal.

“If you have someone who has a relationship and is part of a syndicate, you’re able to tap the right sources with a known syndicator and get it done really quickly,” Boggs says.

Increasingly, Boggs says he is seeing syndicates assembled by backers interested in a particular company or industry provide a pre-VC investment of about $2 million. These limited liability corporations give investors more control and input into a portfolio than they’d have in a VC fund. In a typical VC model, investors rely on the expertise of a general partner to choose a fund’s investments.

Unlike a VC fund, which has pool of money it can readily invest, SPVs need to pass the hat and quickly pull investors on board, Boggs notes. They also need to be prepared for competition because SPV funding can make a company more appealing to VCs, resulting in a Series B round that attracts both VCs and SPV investors.

Terms and Conditions

Investor-friendly terms in fund documents won’t change any time soon, Boggs says, because institution investors have become more sophisticated and knowledgeable about the length of the returns cycle.

“For those funds that seek institutional investment from the typical players—state pension funds and the big university endowments—you’re generally going to need to live with onerous restrictions on those investment dollars.”

Wheeling and Dealing

When a company is an acquisition target, attorneys typically handle negotiators between the parties. But before Cisco Systems could acquire ClearAccess Inc. this spring, Boggs took on a different role. He helped a discordant syndicate of investors—including DFJ Frontier, an investor in the Series A and $6 million Series B rounds—reach critical consensus to move the deal forward.

ClearAccess, a privately held 22-employee business in Washington, had been a portfolio company for years, mostly due to of lack of liquidity in the market, Boggs says.

“Over those years, with various investors, their strategies change and the constituency of their own LPs changes, so you had different competing interests among the investor group. Trying to negotiate a deal that made everybody happy was challenging.”

But not impossible. Boggs helped resolve the investors’ disagreements, and the acquisition is scheduled to close this summer.

Secondary Markets

Facebook’s handling of its IPO has given the secondary market industry a bit of a wakeup call, Boggs says, by disabusing investors of the notion “that you can quickly flip the stock you’ve picked up 24 months before the public offering and recognize a big return. Obviously, those economics didn’t work out that way.”

Investors won’t be as quick to dig deep again, resulting in lower share prices for other big consumer-facing pre-public companies, Boggs predicts. Nonetheless, he expects Facebook to rebound from its initial sag and ultimately return a successful investment.

June D. Bell is a San Francisco-based legal affairs reporter. Contact her at

Attorney at a Glance

T. Hale Boggs


Manatt Phelps & Phillips

Education: After graduating from Stanford University in 1983, Boggs attended law school at UCLA, graduating in 1986.

Experience: Boggs worked for McKenna Conner and Cuneo (now McKenna, Long & Aldridge) after graduation, representing large companies. He joined Manatt Phelps in 1990 and splits his time between the Los Angeles and Bay Area offices.

Fantasy job: Owning and running a high-end boutique hotel in Honolulu.

His must-read blog of choice: The insightful posts on the blog of New Atlantic Ventures (

Frequent flyer advice: Boggs, who makes about 40 trips a year between San Francisco, Los Angeles and New York, has high praise for Virgin America’s steadfast Wi-Fi signal.

Did you know? He’s the grandson of the American Democratic politician Thomas Hale Boggs Sr.