In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.). The amount of the [...]
I’ve done quite a few recent seed deals using various ‘standard’ seed financing docs (Series Seed, TechStars Series AA, etc.). While using these document sets can help reduce transaction costs and the time to close, a startup can run into trouble by trusting deal documents without verification. For example, a startup requested I review a [...]
A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred, YCombinator Series AA Preferred, and TheFunded Founder Institute’s Plain Preferred. And as I mentioned last week, Fenwick & West and Andreessen Horowitz released the Series Seed model documents. The standardized seed funding document movement [...]
“The Series Seed Documents are a standardized set of documents that can be quickly and easily deployed for a seed investment: to help get a company financed properly, legally, quickly, and intelligently.” The drafters, Fenwick & West and Andreessen Horowitz, imply these docs should be used for $500,000 to $1,500,000 investments. The drafters are “open [...]
The liquidation preference is the amount that must be paid to the preferred stock holders before distributions may be made to common stock holders. The liquidation preference is payable on either a liquidation of the company, asset sale, merger, consolidation or any other reorganization resulting in the change of control of the startup. It is [...]
TechStars released a set of model seed funding documents that they use as a staring point for their seed stage financings. The model seed funding documents include: Term Sheet. This sets out the terms of the proposed seed investment into your startup and alsos include the proposed cap table (reflecting the seed investment). Amended and [...]
If you pay any attention to TechCrunch or Venturebeat, you’ll see stories titled “Startup Raises $X Million in Y-round Financing.” When the “Y” in story is a large number, do not assume that the startup company is tanking. Instead, the startup could be gaining momentum and approaching positive cash flow…but just needs one more round [...]
I wanted to give my initial thoughts on the Y Combinator Series AA Angel Investor Legal Documents that were officially released late last week. I plan to write a document-by-document breakdown in the coming week: Term Sheet – August 29th Stock Purchase Agreement – August 30th Board Consent – August 31st Stockholder Consent – September [...]
Y Combinator and Wilson Sonsini Goodrich & Rosati are happy to announce the Series AA Equity Financing Documents. The Y Combinator documents are back up again–grab them while you can. At first glance, it looks like they added a term sheet. And now each document comes with a fancy new header: This [document] and all [...]
I mentioned last week that Y Combinator was open sourcing their angel funding legal documents. I also noted that soon after the documents were made public, people (myself included) received this error message visiting the documents’ URL: Sorry, there’s a glitch with the documents and we had to take them down. We hope to have [...]
Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions. Click here to learn more about his practice.
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