Industry Article

R&D Credits for Startups

A healthcare technology startup claimed the R&D Tax Credit to offset payroll taxes. They received a $498,142 dollar-for-dollar offset against taxes paid, resulting in an 805% return on their investment.

Client Profile

Location: Raleigh, NC
Industry: Healthcare Technology
Size: 50 employees
Revenue: $1.5M annually

How Cherry Bekaert Made a Difference

A startup technology company based in Raleigh, North Carolina, approached Cherry Bekaert Credits & Accounting Methods Team
(“C/AM Team”) about maximizing their R&D credit.

The company is focused on developing new smart technologies specifically tailored to serve and empower older adults and
individuals living with disabilities, and, since beginning operations in 2013, the startup has developed several custom software
solutions as well as an integrated operational management platform.

Although the startup has yet to see a lot of taxable income, they have incurred significant costs, including payroll taxes. The
Federal R&D credit can be used to offset the employer’s portion of payroll taxes, giving a substantial cash benefit to innovative
start-up companies. Up to $250,000 of payroll taxes can be offset each year.

In early 2019, C/AM offered the startup a complimentary scope for the 2017-2018 tax years. The scope estimated that the startup
was entitled to an impressive $318,428 credit.

Once the project began, the C/AM team went on site and discovered even more qualified costs, such as wages & cloud computing,
expanding the tax benefits 57% beyond that of the scope to a staggering $498,142 (805% ROI). At the conclusion of the study, a
team from C/AM went to the client site to review the deliverable and explain the benefits further.

Ron Wainwright, Jr., CPA, MST
Tax Partner and National Leader,
Credits & Accounting Methods

ThreatWarrior Joins Carbon Black Integration Network (CBIN) to Deliver End-to-End Threat Protection

ThreatWarrior, a leader in next-generation network security, and Carbon Black, a leader in cloud-native endpoint protection, today announced a collaboration as part of the Carbon Black Integration Network (CBIN) to help customers improve network visibility, enhance cyber threat resolution, and extend device-level monitoring.

By correlating Carbon Black’s endpoint analytics with full-network visibility and 3D visualization, ThreatWarrior will help customers better understand their networks to identify and stop cyberattacks.

“Organizations often lack the ability to visualize and quickly analyze massive amounts of data,” said Pete Slade, founder and CEO of ThreatWarrior. “ThreatWarrior delivers real-time situational awareness, and makes it easy to see and understand your network. By working with Carbon Black, ThreatWarrior will be able to further provide comprehensive network protection combined with deep insights into endpoint activity.”

ThreatWarrior and Carbon Black take different but complementary approaches to cybersecurity. ThreatWarrior uses advanced machine learning to observe all devices on a network without needing to install software agents. ThreatWarrior is able to display IoT devices, printers, network infrastructure, rogue devices, and more, in a 3D visualization of the entire threat surface rendered onto a single pane of glass. Additionally, ThreatWarrior can digitally quarantine a device on the network when potential compromise is suspected.

Carbon Black’s cloud-native endpoint protection platform (EPP) continuously monitors a user’s machine to detect malicious files, enforce compliance regulations, detect registry/configuration changes, and block processes to prevent attacks from harming an organization.

Through this collaboration, joint customers will benefit from comprehensive threat visibility, pervasive threat monitoring, and advanced forensics and analytics. The partnership between ThreatWarrior and Carbon Black allows organizations to:

– Gain a holistic view of threat activity and quarantine network devices through ThreatWarrior
– Identify and stop more cyber threats by correlating detailed endpoint analytics with network-wide context to detect early threat indicators
– Visualize network communication and threat events in real time
– Streamline alerts and response measures by integrating Carbon Black notifications into ThreatWarrior’s centralized alert system

“The work ThreatWarrior has done to provide customers with a comprehensive view of threat activity on the network has been great for the industry,” said Tom Barsi, Carbon Black’s SVP of Business Development. “Now, by joining the Carbon Black Integration Network, the ThreatWarrior team will be able to further understand what’s occurring on the endpoint to keep customers safe from advanced cyberattacks.”

About ThreatWarrior

ThreatWarrior is a leader in next-generation network protection dedicated to lowering global cybercrime. The ThreatWarrior platform decreases the complexity of cybersecurity, giving the power back to the defenders and making it possible for all organizations to protect themselves. It combines adaptive AI, network traffic and behavior analytics, incident forensics and response in a single solution to protect businesses from constantly-evolving cyberattacks. With ThreatWarrior, businesses can eliminate cyber threats before they’ve caused damage. To learn more, visit, and follow us on Facebook, LinkedIn and Twitter as we deliver cybersecurity to the masses.

The Final Insurance Inflection Point for Startups

A common question asked regarding insurance in the startup space is ‘what do I need and when do I need it?’ The answers vary based on revenue, clients, and number of employees, but the most common ones are outlined in the Lumen blog, 5 Insurance Inflection Points for Insurance. As time passes, it warrants a revisit to add a company’s last inflection point: the Acquisition! In this month’s blog, the inflection points through a startup’s journey are reviewed in addition to what is needed post-acquisition.

Inflection Point: Adding Big Time Board members

Coverage to consider: D&O

The bigger the name or net worth of the individuals on your board, the more likely they will want personal protection. This is code for Directors & Officers (D&O) Insurance.

Inflection Point: Receiving Institutional Funding

Coverage to consider: D&O and Key Man Life

If you raise institutional funds, your lead VC will likely be on the board. You will also be required to carry a few million dollars of D&O as part of your term sheet. They may also require Key Man Life, especially for a high power CEO or technical co-founder. Reference Lumen’s prior blog: Key Person Life: Your VC Wants Key Person Life On You and Why It’s Not ‘Weird’.

Inflection Point: Signing a Commercial Lease

Coverage to consider: General Liability, Workers Compensation, Commercial Auto, Commercial

These are common requirements in a lease. See Lumen’s prior blog on this for more details: What You Need to Know about Commercial Leases: Common Insurance Requirements..

Inflection Point: Hiring Lots of Employees

Coverage to consider: EPLI

Bringing on a slew of new employees can lead to increased exposures on the HR side. This may include employment practices related claims such as discrimination or sexual harassment. If you use a PEO, it may include Employment Practices Liability Insurance (EPLI), but be sure to get clear on this coverage at this inflection point.

Inflection Point: Landing Large Client Contracts

Coverage to consider: E&O, Cyber, Commercial Crime

In general, the larger the organization, the larger the legal & risk management teams. This means your contracts might have specific requirements. Reference prior Lumen blog: Too Busy ‘Crushing It’ to Run That Contract By Legal.

Inflection Point: The Acquisition

Coverage to consider: D&O, EPLI, E&O, and Cyber Tail Coverage

Funded startups have two possible outcomes: success or failure. 99.9% of the time success will be in the form of an acquisition. It is assumed coverage will roll up into the acquiring company’s program, and all policies can be cancelled at that point. JUST A SECOND THERE, PROFESSOR!

This is a critical step in the lifecycle, and liability does not necessarily end when the docs are signed. Since some claims can take time to bubble up, there is often a clause in the term sheet to require some of the claims made policies to provide tail coverage for years after the acquisition. Here are a few common ones:

D&O Tail – is the most common requirement. Most startup founders, execs and board members will want this, even if it is not required by the acquiring company, since their names can be listed on lawsuits made prior to the acquisition. The acquiring company will often require this up to 6 years post-acquisition. Reference prior Lumen blog: D&O Tail Coverage – Tips for the Acquisition for more details on what this means, cost and other tips on how to navigate this before, during and after an acquisition.
EPLI Tail – This can often be included on your D&O policy or as a stand-alone policy, but either way it is important to highlight. Lawsuits often arise from bitter employees post acquisition. Perhaps an employee’s shares did not vest, or they were terminated, losing all their shares. The intent here is not to diminish legitimate claims, but it can be suspicious to receive a demand letter referencing a wrongful termination or sexual harassment years in the past now that the execs have some coin in their pockets. If a PEO provides EPLI, it may be a good idea to ask how coverage will be affected post acquisition.
E&O and Cyber Tail – This request is a little less common, but we have seen an uptick of these requests in 2018 and 2019. Since E&O and Cyber are often combined on one policy form, these will be referenced together. Both can come back to haunt a startup. Hacks are often not detected for months or years after they occur. According to this 2018 Cost of a Data Breach Study sponsored by IBM Security with research independently conducted by Ponemon Institute LLC, it takes an average of 266 days to identify a breach. Depending on the sophistication level, legal counsel, and hold back clauses of the acquiring company, this might be a request from in the term sheet. Most of the time the policy is going into runoff or putting in a 2 year tail here to match the hold back clause. This can be in lieu of or in conjunction to the acquiring company’s existing coverage. It is good to question how coverage will be affected as it gets rolled up into the acquiring company’s program.
In summary, there are several inflection points in the startup lifecycle. Even when the acquisition is
complete, liability is not over. It is wise to consult your insurance broker and keep them in the loop at each inflection point. Here is a review of some good inflection points to discuss with your broker:

  • Adding big time board members
  • Receiving institutional funding
  • Signing a commercial lease
  • Hiring lots of employees
  • Signing a large client contract
  • The acquisition

Lumen Insurance Technologies is a tech-focused commercial insurance agency based in Austin, Texas. Lumen is hyper-focused on providing the technology startup ecosystem with quality commercial insurance coverage (e.g. D&O, E&O, Cyber, etc.) following a funding event and beyond.

Check us out on the web at to find more blog topics, general info, or to get help with finding coverage. Email us at if you would like to suggest a topic for future blogs.

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