5 questions every US tech startup founder needs to ask before taking money from a foreign investor

Headshot_HiRes_Edelman, Doreen

  • From Japan’s SoftBank to the Australian sovereign wealth fund, foreign money is pouring into Silicon Valley startups.
  • While it may be tempting for founders to take large checks from generous investors, attorney Doreen Edelman said that US companies need to consider the risks they take when accepting foreign investments.
  • Companies in industries like artificial intelligence, the Internet of Things, and robotics may see their foreign investments rejected by the US government on the grounds of national security.
  • While it’s possible to get some investments through, Edelman said, the more access and control an investor has, the more time, paperwork and money it will take to get approved.
  • Read more on the Business Insider homepage.

Uber took a $3.5 billion investment from the Saudi Public Investment Fund in 2016, and gave a board seat to its managing director.

Databricks took $33.24 million in 2015 in a round with participation from Future Fund, the Australian sovereign wealth fund.

And Zumper took $45.65 million in a 2018 round led by Axel Springer, the German publishing giant (which also happens to own Business Insider).

Yes, the early days of Silicon Valley were so geographically constricted that many of the most high-profile investments were made by people who worked near each other on the legendary Sand Hill Road. But today, the startup investment ecosystem is global, with large checks being written by foreign allies and adversaries alike.

While investors are eager to open their wallets, taking a foreign investment isn’t as simple as cashing a check, said Doreen Edelman, head of Lowenstein Sandler’s Global Trade & Policy Group.

As US startup founders consider to whom they want to sell equity, they must also consider a host of legal issues that could come up with foreign investors, she said.

Depending on the circumstances, investments from foreign investors could create delays, extra paperwork, and result in costly fees. In the most extreme cases, the investment may be blocked entirely. Even if the investment has been completed, though, the US government may force a divestiture afterwards.

Sanctions and tariffs can also create problems for companies down the road.

Before any of that happens, these are the five questions Edelman says every tech founder needs to ask themselves when considering a foreign investment. 

SEE ALSO: PayPal already lost $37 million on the Uber investment it just made as part of the IPO

What’s the industry?

If you’re a tech company working on artificial intelligence, robotics, the Internet of Things, or personal data, your foreign investment could be blocked on grounds of national security, Edelman said. 

There are 27 different industries under the Department of the Treasury’s Foreign Investment Risk Review Modernization Act of 2018, known as the FIRRMA pilot program, which are required to file with CFIUS ahead of a foreign investment.

Companies outside of those industries can voluntarily file with CFIUS as well just to make sure everything is in good standing.

In theory, regulations against foreign investments are designed to prevent foreign governments from getting access to technology or intellectual property that could harm US national security. You probably don’t want a foreign government to have access to the software used by the National Security Agency, for example. 

But the definition of “national security” is up to a continuous, fluctuating interpretation.

Traditionally such laws only impacted technologies in the defense sector. But today the US government takes a broader scope, Edelman said.

“It could be anything, if you look at it through the lens of, what could an anti-US government or group do with it?” she said. 

Could that change in the future?

Whether or not a technology is used by the defense sector today, Edelman said, it’s important that founders consider whether they could eventually grow into the niche.

“Could you be in the defense sector? Be aware of what that will mean going forward,” she said. “To some companies, it just means we have to plan ahead, just like any other government filings. We may have to make additional filings. And that just takes time and money.”

Under certain circumstance, she said, the government could force the foreign investor to divest from the startup, or the company may be forced to avoid certain natural growth opportunities involving their product development, so as to not rock the boat.

“If Chinese money is going to invest in a potential defense product, even a commercial product that may work in the defense sector in the future, you need to be prepared that it’s going to affect what you can do down the road,” Edelman said, adding that the same concern applies to investors from other countries.

“You’re going to be limited because the US government is not going to allow you to have that technology or those patents or that software that can be contracted away to the Chinese, or just for the Chinese to have access to that technology,” she said.

Who is the investor?

While CFIUS has more-or-less put a pause on all acquisitions and investments between the US and China, founders need to pay attention to foreign investors whether they are based in a country that is a friend or a foe to the US.

It can be Canada. It can be Israel. It can be Germany,” said Edelman.

Ultimately, whether or not an investment is an issue will come down to the specifics of the investment, Edelman added. 

If Mubadala, a state-owned investment firm in the United Arab Emirates, was a limited partner in a funding round without any control over the company, it would most likely not cause a stir.

“If it’s truly an LP just investing for money,” she said, “it can invest in whatever it wants.”

That said, founders will want to be mindful of the shifting geopolitical landscape since the Trump Administration mixes politics and trade differently than in the past, she said.

This president is using the tools in his tool box differently,” Edelman said.

A Japanese company that does business with North Korea or Iran will be viewed differently than a Japanese company that doesn’t, for example.

“It’s very possible that the political situation would allow this administration to use these trade tools to either punish or enforce the political positions that the president is taking. That’s why ‘national security’ is flexible in how the government defines these terms,” said Edelman.

Will they have access to the “secret sauce?”

Another question founders should ask before taking a foreign investment is how much information they would be required to share with the investor. 

Foreign access to “any control technology or the secret sauce or the IP or personal data” could all create issues for the company, Edelman said.

Early stage investors are often deeply involved in the business process, and access intellectual property and customer data as part of day-to-day business. The US government sometimes requires permits to share technology between countries.

Companies in industries highlighted by FIRRMA are required to file with CFIUS if investors will have access to their technology.

Founders must also consider whether there are any export controls on their product.

While a tech company may not necessarily export products via ships at sea, some cloud based software is still controlled for export and may face restrictions on who can use it or buy it abroad.

“A tech company that doesn’t export but is going to take foreign investment needs to understand if any of its product is controlled for export,” Edelman said.

Will they have a board seat?

Giving up a board seat to a foreign investor further complicates the process. 

Japan’s SoftBank has made tons of investments in US tech startups, but even it failed to get approval for two seats on Uber’s board.

“If you want to give them the board seat, you need to know that would require you to go through the CIFIUS process,” Edelman said regarding companies under the FIRRMA pilot program guidelines.

Even companies which are not mandated to file may be inclined to file because of the board seat, she said.


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'Criminal Minds': Where to Stream Every Episode – PopCulture.com

Criminal Minds may be ending, but there is still a way that fans can stream every episode of the beloved series.

While the show may only have one last upcoming season before it ends, every single episode so far is available to watch online.

Subscribers of the CBS All Access service can watch any Criminal Minds episodes at anytime on the Internet and on devices that support the streaming service’s app.

Criminal Minds stars Matthew Gray Gubler, A. J. Cook, Kirsten Vangsness, Paget Brewster, Joe Mantegna, Aisha Tyler, Adam Rodriguez, and Daniel Henney.

The 15th and final season of Criminal Minds was announced in January, with CBS’ EVP current programs Amy Reisenbach saying, “It is the quintessential CBS hit. We are so proud to have aired it. It speaks to everything we do best, which is air quality television. It’s been successful not only on air but online, in syndication, internationally for ABC (Studios).”

Erica Messer, Criminal Minds’ executive producer and showrunner, spoke to Deadline about the end of the show, saying, “In some ways, the series has always felt like the little engine that could,” then going on to thank CBS for being “a great home for a very long time.”

“What’s so bittersweet about it, is that we are going out still with stories to tell, and we’re not on life support,” she then added. “We’re not a show that got moved from night, to night, to night. I’m not talking ill of any of those shows, but all those signs that you usually see before a show is gone, we didn’t have any of that.”

The network wanted to honor the legacy of the show and give it one final season, despite a decline in ratings over the past few seasons.

“We wanted to make sure Erica had the time and ability to write a season (14) finale that honors the characters and the fans,” Reisenbach said. “We discussed wanting to keep the show in continuous production so 10 felt like the right number for us to roll straight into and give Erica enough episodes to end the series the way she wanted to.”

The final season of Criminal Minds will consist of 10 episodes and is expected to debut sometime next year, but no premiere date has been announced at this time.

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Navy SEAL War Crimes Trial in Turmoil Over Claims Prosecutors Spied on Defense – The New York Times

The court-martial of a highly decorated Navy SEAL platoon leader on war crimes charges has been thrown into turmoil by, of all things, a harmless-looking image of a bald eagle perched on the scales of justice.

The bit of digital artwork, embedded in an email message, contained hidden software that could track if anyone read or forwarded the email, and may have also been able to allow access to all communications and files on the recipients’ computers, defense lawyers argue in court filings.

The email was sent last week to defense lawyers representing Special Operations Chief Edward Gallagher by the lead Navy prosecutor in the murder case against the chief, apparently with the judge’s approval. The tracking software was also included in emails sent to lawyers for the chief’s commanding officer — Lt. Jacob Portier, who is charged in a related case — and to a journalist for Navy Times covering both cases.

Furious at what they see as an improper attempt to spy on them, the defense lawyers are demanding an investigation, and the suspension of proceedings against both men while it is conducted. Chief Gallagher’s trial is currently scheduled to begin May 28.

“This was a cyberwarfare attack, this is not just some software you get at Walmart,” said Jeremiah J. Sullivan III, who represents Lieutenant Portier. “It has violated my client’s constitutional rights, and it created a conflict of interest that calls into question whether prosecutor and the judge can stay on the case.”

The prosecution of Chief Gallagher has been highly contentious. He is accused of gunning down civilians and knifing a captive ISIS fighter to death while leading a platoon of SEALs in Iraq in 2017. Lieutenant Portier is charged with failing to report the killings. Both men have pleaded not guilty and denied wrongdoing.

[Read more about howa confidential Navy report found that platoon members were warned against speaking out against Chief Gallagher.]

The Gallagher case in particular has been the subject of a steady stream of leaks in recent months. Even after the Navy judge in the case, Capt. Aaron Rugh, imposed a gag order, important information has sometimes reached reporters before some of the lawyers involved the case have seen it.

According to a court motion filed by the defense, the clandestine tracking software was sent in an attempt to catch the leakers and sanction them for contempt of court. Judge Rugh and the lead prosecutor, Cmdr. Christopher W. Czaplak, worked with the Naval Criminal Investigative Service and the United States attorney’s office in San Diego to deploy the software, and met three times to discuss the action without defense lawyers present, according to the motion.

The Naval Criminal Investigative Service acknowledged in a statement it used “an audit capability” in the course of its investigation into the leaks, but said, “It is not malware, not a virus, and does not reside on computer systems. There is no risk that systems are corrupted or compromised.”

A motion filed by the defense contained an image of an email it said contained tracking software.

Defense lawyers grew suspicious when the bald-eagle image did not load correctly on some email accounts, and instead appeared as a hyperlink to a nonmilitary server. They confronted prosecutors about it in a conference with the judge.

In communications with defense lawyers, Commander Czaplak characterized the software hidden in his office’s emails with the defense lawyers as an “audit tool.” He said he could neither confirm nor deny that it was part of a contempt investigation, and referred questions about the matter to Fred Sheppard, an assistant United States attorney.

A spokeswoman for the United States attorney’s office is San Diego, where Mr. Sheppard works, said the office “is not handling the ongoing court-martial proceedings involving Edward Gallagher and is not involved in the production or dissemination of discovery in that case.”

In response to the defense motions concerning the tracking software, Navy prosecutors said in a court filing this week that information about it was privileged, and that they were not required to share anything more about it.

Prosecutors also sent the tracking software in an email message directly to Carl Prine, a reporter for Navy Times who has been the recipient of many leaks concerning the Gallagher case.

The executive editor of Navy Times, Andrew Tilghman, said in a statement Thursday that the targeting of a reporter was “a troubling assault on journalists and the work we do.”

“These are not classified documents that we’re talking about, so it’s especially disturbing to find that the military took these extreme measures to secretly surveil the activities of our reporter,” Mr. Tilghman said. “This is potentially unlawful, and should be thoroughly investigated.”

He said that Mr. Prine would not cover any news related to the tracking software hidden in the eagle image.

[For more stories about the changing nature of warfare, sign up for the weekly At War newsletter.]

Bill Marczak, a cybersecurity expert at Citizen Lab, a research institute at the University of Toronto, said the software was linked to a private server, and could record where, when, and potentially who was reading the email. Mr. Marczak said the server has since been shut down.

According to a military email, the software may have been able to do more than that. In that email, military cybersecurity analysts report to an Air Force lawyer who was detailed to help represent Lieutenant Portier that the tracking software might also have been able to “uncover any actionable insights from all your data (email messages, attachments, etc.) you send and receive.”

Air Force cybersecurity experts have taken the lawyer’s computer and phone for inspection.

Seasoned legal observers say the attempt to detect leaks of nonclassified material — a relatively minor civil offense — may upend the Gallagher court-martial, a major criminal case that has the attention of top officials in Washington.


Representative Duncan Hunter, Republican of California, says he has video footage that would clear Chief Gallagher, but he has not released it publicly.CreditJim Lo Scalzo/EPA, via Shutterstock

“I can’t believe they did this, it’s so stupid,” said William Glasser, a retired Army and Navy prosecutor. “Even if they caught the leaker, I think the judge and prosecutor will have to be removed, because now they are part of the investigation against the defense. There is an inherent conflict of interest.”

“Plus it violates the sacred attorney-client relationship,” he added.

The defense lawyers said in court filings that the software appeared to have been deployed without the proper search warrant, and may have violated constitutional protections against unwarranted searches and seizures.

Patrick Korody, a former Navy prosecutor who he has worked with Commander Czaplak, said he doubted that the commander would have acted without proper clearance, but he still questioned the wisdom of the move to use the tracking software.

“This may all be authorized, they may have had the proper warrant, but it is so reckless,” he said, “because it still creates all kinds of conflicts.”

Mr. Korody said that at the very least, questions over the attempted snooping could delay both of the SEAL cases for months.

Sending the software to Mr. Prine, the Navy Times reporter, was also a questionable move, according to Susan McGregor, who teaches digital security and ethics at the Columbia University School of Journalism. “It may well violate accepted legal standards for journalists’ privilege, as well as the journalist’s Fourth Amendment rights,” she said.

The revelations about the tracking software further complicate what was already shaping up as a difficult case for prosecutors. Though several members of Chief Gallagher’s SEAL platoon have said they saw the chief shoot civilians or stab the teenage ISIS fighter when he lay wounded and helpless, no formal investigation was begun for nearly a year, and by that time, much of the physical evidence in the case, including victims’ bodies, could not be recovered.

Prosecutors have also accused Chief Gallagher of trying to intimidate witnesses in the case. He denies those accusations as well.

Supporters of the chief, including his wife and brother, have made his case something of a cause célèbre, portraying him repeatedly in media appearances as a hero wrongly prosecuted for doing his job. They say they have raised more than $500,000 in donations for his defense.

Representative Duncan Hunter, Republican of California, announced at a news conference last week that he had video footage that he said would clear Chief Gallagher, but he did not show the footage to reporters. Mr. Hunter said he planned to ask President Trump to pardon the chief if he is convicted.

Chief Gallagher, who is restricted to a Naval facility in San Diego as he awaits trial, recently dismissed his lead attorney, Philip Stackhouse, a San Diego lawyer experienced in military law, and hired Timothy Parlatore, a New York lawyer who says in his business profile that he is skilled at handling “high-profile cases where adept media relations are a necessity.”

“I think this case should be dismissed for prosecutorial misconduct,” Mr. Parlatore said of the Gallagher court-martial in a phone interview this week. “They were caught spying. We need the prosecutor under oath to find out what he did, and we need to hear from the judge.”

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Here's the follow-up email Google sent to employees after last week's warning about leaks sent a jolt across the company (GOOG, GOOGL)

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  • After an internal email meant to resurface Google’s data sharing policies sparked concerns from employees last week, an update was sent via the company’s daily newsletter on Tuesday to clarify the tech giant’s position. 
  • The update — which was formatted as a Q&A with Google’s Chief Legal Officer, Kent Walker — reiterated the reason for data access controls and tried putting to rest fears that collaboration across teams would be harmed. 
  • But two current employees who spoke to Business Insider said Walker’s most recent remarks didn’t go far enough to address internal fears that Google will use its broad definitions around data sharing for arbitrary retaliation. 
  • Below is the full note Google distributed internally on Tuesday containing Walker’s comments and clarifications on the rules.
  • Visit Business Insider’s homepage for more stories.

Google spooked employees last week when it sent a company-wide “reminder” that sharing certain kinds of data, even with colleagues within the company, can be a fireable offense.

Some employees that Business Insider spoke with saw the email as part of a push to clamp down on leaks at a time of unrest at the company. And they worried that the reminder email was actually a tightening of data sharing rules that could chill workplace collaboration and that Google could use as a pretext to discipline certain employees.

The note caused enough internal agitation that Google took steps to calm the waters on Tuesday with a follow-up note designed to clarify the rules around sharing “need to know” information. 

The update — which was formatted as a Q&A with Google’s Chief Legal Officer, Kent Walker — reiterated the reason for having controls on data access and tried putting to rest fears that collaboration across teams would be harmed. 

Read more: Google is threatening to fire employees in a crackdown on leaks about ‘need to know’ projects

Tuesday’s update states that Google’s internal data controls and classifications have been around since 2007, but that it has “periodically updated the policy language to make it easier to understand and apply.” Some of those updates include adding examples of “need-to-know” information, like project plans and customer data, but that there’s been no change to the “intent of the policies.” 

“[The policies] contribute to a culture where people can have candid conversations, collaborate on joint projects, and share post-mortems or design docs with others as useful for their work,” Walker said in the note. “Particularly at our scale, it’s important that we have clear rules and are all on the same page.” 

A tool to squash leaks about controversial projects?

Still, two current employees who spoke to Business Insider said Walker’s most recent remarks didn’t go far enough to address internal fears that Google will use its broad definitions around data sharing to retaliate against employees who raise concerns over controversial projects or participate in workplace organizing efforts, like the November Walkout to protest Google’s approach to sexual harassment complaints.

“It mostly ignores the concern about the policy possibly being used to retaliate arbitrarily,” one current employee told us. 

Walker’s email last week reminded employees that improperly accessing, copying, or sharing “need-to-know” or “classified” information — whether or not it was labeled as such — could result in disciplinary action and, firing. In Tuesday’s note, Walker said those disciplinary actions were “generally taken” against individuals who intentionally violated its policies, especially in a way that caused serious risk to user privacy or was harmful to co-workers. 

Google walkout London.JPG

A Google spokesperson told Business Insider that a certain level of common sense was used by the company when assessing a violation of its policies and whether or not it warranted disciplinary action. 

But another current employee told Business Insider that Google’s response “actually confirms that the intent is to make it explicitly against the rules for Googlers to do research into what the company is working on with the intent of having some say in it.” 

Both of the employees who spoke to Business Insider questioned the timing of these update emails — amid heightened fears of retaliation against organizers at Google — and say it is unclear how the policy will be applied. 

Here’s the company-wide email sent to Googlers on Tuesday with answers from Chief Legal Officer, Kent Walker: 

Subject: [Daily Insider] More on data classifications

Last week, Kent Walker sent Googlers a reminder of our data classification policies. We sat down with Kent to learn a bit more.

What’s the goal of the policies? Our security policies around data are designed to protect the various kinds of sensitive user, partner, and business information we work with. That includes things like user data, partners’ payment information, healthcare records, product plans, device specs, or financial projections, or our own internal sensitive materials. The policies have always had a few purposes. They contribute to a culture where people can have candid conversations, collaborate on joint projects, and share post-mortems or design docs with others as useful for their work. They enable us to meet our commitments to users, and confidently tell partners that Googlers are treating, accessing, and sharing their data appropriately. And there are legal consequences for Google and our employees if we don’t treat user and partner data carefully — especially as we work with partners (ranging from healthcare companies to ad agencies to OEMs) who have serious obligations and an expectation that we’ll access their information only as necessary.

How long have we had these kinds of policies? We’ve had a number of access controls for many years, and have had policies around various categories and classifications of data since 2007. So these polices are longstanding. Particularly at our scale, it’s important that we have clear rules and are all on the same page. We have periodically updated the policy language to make it easier to understand and apply. For example, we added examples of things we’ve always considered Need-to-Know data, like project plans and customer data. But there’s been no change in the intent of the policies.

What if I access Need-to-Know data even if I don’t have a business reason to do so? Even if the data isn’t clearly marked, if you think the content should be labeled Need-to-Know, please let the relevant people or the team at misdirected data know that the file may not have the right access controls. And obviously don’t share the document or its contents with others. I do want to note that we’ve generally taken disciplinary action over intentional violations of these policies, typically involving serious leaks of data, risks to user privacy or harm to co-workers, or actions that jeopardized our business operations or potentially violated our legal obligations. Fortunately, those instances have been rare.

What about documents that aren’t labeled? Good labelling and appropriate access controls reduce the chances of inadvertent access. But while labels are helpful, the nature of the data determines its classification, so if you access something that is unlabeled or you believe is mislabeled, reach out to the owner or team working on the issue. If you want to raise concerns about a project, including about content in a document, please email Security & Privacy, contact Ethics & Compliance, or raise a concern through pages [deleted]

Do I need to go back and examine all my existing data? While we don’t expect people to go back through all of their documents, please do consider any sensitive information you’ve worked on and whether relevant documents are shared only with appropriate audiences (and, ideally, labeled correctly). For existing documents, you can use the Drive Visibility tool to check and correct access settings. And make sure you and your team are following the policies moving forward.

What if I’m not sure whether my data or project is Need-to-Know or Confidential? In the first instance, it’s the responsibility of the data owner to determine whether data is Confidential or Need-to-Know, and to establish appropriate access controls. Documents incorporating data should use markings and access controls appropriate for the data. To determine whether data or a document is Need-to-Know or Confidential you can review the policy guidelines at [deleted]. If you aren’t sure how something you’re working on should be classified, check with your [deleted]

How can I learn more? Email …. if you have any questions, and stay tuned for more refresher trainings to be rolled out across the company.

You can read the original email Google sent to staff last week about “need to know” information here.

Do you work at Google? Got a tip? Contact this reporter via Signal or WhatsApp at +1 (209) 730-3387 using a non-work phone, email at nbastone@businessinsider.com, Telegram at nickbastone, or Twitter DM at @nickbastone.

SEE ALSO: Google just rolled out its biggest move yet to steal ad budgets from Facebook and Pinterest, and says its new ads can reach up to 1 billion eyeballs a month

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