QSBS Spotlight: Harvey Secures $300M Series D, Rare Tax Savings Situation

A weekly series where we cover recent acquisitions, capital raises, and pending IPOs that may be Qualified Small Business Stock (QSBS) tax exemption eligible, granting investors and planners insight into real world planning opportunities using QSBS rollovers.

Harvey, the Open-AI-backed artificial intelligence firm that develops tailored suite products for lawyers and law firms has raised a $300M Series D, ticking their valuation up to $3B after launching in 2022.

They’re in a unique position to retain up to 30% or more of any money taken off the table through simple QSBS tax-planning.

With this injection of capital from Sequoia, Coatue, Kleiner Perkins, and others, Harvey is positioned to continue massive growth, expecting to double down on rapid ARR expansion after a 4x in 2024…

So, with all this capital flowing into the firm, the space for QSBS-eligible investment likely passed several rounds ago. The pace does, however, leave open the opportunity for founders Winston Weinberg and Gabe Pereyra (and likely other early shareholders) to take advantage of secondary sale components of these rounds tax free with QSBS rollovers. Since the company was only just recently founded in 2022, shares issues back then wouldn’t be eligible for QSBS benefits without a rollover.

(Bridge the 5-year holding period gap)

Early investors in Harvey who are sitting on significant gains from secondary sales due to funding rounds may be facing a hefty tax bill—unless they take advantage of a Qualified Small Business Stock (QSBS) rollover. By strategically reinvesting proceeds into another QSBS-eligible investment, they can defer capital gains taxes and potentially eliminate them entirely if the new investment meets the five-year holding period.

Given the scale of Harvey’s growth, this is a rare window to maximize after-tax returns, lessen the amount that has to be taken off the table (given tax burdens are eliminated)

Congratulations to everyone involved in this transaction!

For more information on QSBS rollovers and how they can help to bridge the 5-year hold period gap, or multiply the $10M exclusion limit, read more below or contact our team Program Director at [email protected], or take our eligibility quiz, here.

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You could benefit from a QSBS rollover if:

• You recently sold QSBS before the 5 year minimum hold period
• You recently sold QSBS that you held for 5 years, but your gain exceeds $10M
• You’re considering an exit in the next 1-4 years and want to think ahead about tax planning
• Are an angel investor seeking flexible QSBS opportunities to help defer gains

The Vint Retail Partnership Program can be a solution for QSBS gain holders in need of a flexible, low-risk, and relatively liquid QSBS opportunity. Get in touch with our team today to learn how to partner with us and potentially save millions in gains tax from a stock sale.

Here are some of the questions we typically ask when having a first meeting with potential partners:

• Did you recently sell or are you holding Qualified Small Business Stock?
• When did you sell your stock?
• Was this your first liquidity event?
• Are you a founder, early employee, outside investor/angel, etc?
• Are you certain that your stock met the Active Trade/Business and other requirements under Section 1202? (Outside of holding period requirements)
• What is your intended rollover amount?
• How long did you hold your initial stock?

(Read more about QSBS planning and see some example situations)