I chose the latter approach for several reasons. At first, I thought it would be better to make these documents as simple as possible. Second, I wanted the documents to be human-readable (unlike lawyers), and there are certain provisions in a vanilla set of Series A funding documents that are simply too dense for most civilians to pass through (for example. B, price-based anti-dilution). Third, while the simpler documents for the next round of funding require more optimization, this next round of funding should be a larger round of resources when such an investment is appropriate. Let`s imagine that using simpler documents saves 10% of the time and money associated with seed funding. Even though it takes 20% more time to add a full set of provisions in the next round, it`s a good deal because (a) less than 50% of seed-funded businesses move on to the next round, and (b) the dollars from the next round are cheaper at this point because it`s a larger fundraiser. When we launched Series Seed, we committed to making it a crowdsourced document set. With the release of today`s version 3.2, we are taking our most important step in this direction.

The vast majority of changes to this version are participatory optimizations aimed at removing legal language. In particular, we would like to thank the following commenters and contributors for their efforts: @rickcolosimo @zekevermillion @thesmart @strikeroot @sblom @jackmaney @blueseed @commonaccord. Regardless of the basic need to trust each other, founders need to have a very good understanding of what it takes to change the shareholders` agreement and share capital structure in the future. Yet, in the midst of all these other dramatic changes, one aspect of startup life hasn`t changed at all: the legal documents used to fund these transactions. A typical set of venture capital investment consists of five documents: two certificates, a legal opinion and two consents, and is about 100 pages long (without signature pages). These documents provide for a number of rights, preferences and privileges, some of which are crucial to protect the investment from the outset and others only become important after the company`s IPO. This level of investment in funding documentation made sense when investments were $3 million to $5 million, but for these small rounds, it`s simply exaggerated. Sometimes you may find little difference between an angel investor or seed term sheet and a venture capital term sheet. The investment structures required by angels and founding covenants are less limited by standardized institutional practice. · Equity documents give investors a clearer definition of rights, more stability and less potential litigation in the next round. · Shares give investors the opportunity to receive long-term tax treatment on capital gains in the event of an early exit. Angel investors often invest through convertible bonds.

Investors lend money to the company, as the loan amount can be converted into shares of the startup. Angel investing almost always requires a shareholders` agreement between the founding group and new investors. When reviewing or writing a proposal, keep these basic points in mind: This is a simple term sheet that can be used when a company raises capital from family friends and start-up investors. It defines the terms agreed between the company and the investor before the preparation of formal agreements. The term sheet is not legally binding (with the exception of the confidentiality obligations of Part B). Some details on this project. First of all, it`s not Fenwick & West or my own form documents. While I did the work (with the support of Khang Tran) and many of my colleagues at Fenwick & West helped me with the original drafts, these documents are intended to be an open source project and not specific to a lawyer or law firm. Nor is it an Andreessen Horowitz company. While I`m happy to have the company`s support to kick off these efforts, the series` startup documents will require wide adoption to become an effective standard.

The following investors have agreed to use the series seed documents in some of their transactions: Baseline, Charles River Ventures, SV Angel (Ron Conway), First Round Capital, Harrison Metal Capital, Mike Maples, Polaris Venture Partners, SoftTech VC and True Ventures. None of these investors intend the seed documents in the series to be the only way to document a transaction, as there are a variety of scenarios in which a larger set of documents or another alternative structure would be preferable to investors or entrepreneurs. Finally, please read the disclaimer. While I am happy to provide these documents, you may use them at your own risk. A seed investor agreement refers to a document that clearly sets out the terms of a particular investment. Its length varies between one and five pages, and it is usually a non-binding document. The only binding parties may be clauses relating to confidentiality or exclusivity. In situations where start-ups are approached by start-up investors, the agreement can be prepared by one of the parties. All of these agreements must include some key clauses: standardized seed investor agreements are avoided by start-up lawyers because it makes their role less important. The reason why start-up lawyers usually discredit these standardized contracts is their simplicity.

Complicated clauses are added to contracts not only to justify the involvement of the lawyer, but also to prevent problems from arising in the future. The main task of the lawyer in such an agreement is not to draft the contract, but to advise at each stage of the negotiation. There has been a fierce debate on the subject with people like Fred Wilson, Paul Graham and Seth Levine, who have all been involved. To clarify, there is no doubt that you, as an entrepreneur, would prefer unlimited convertible bonds to stocks. As Josh and many others point out, this is usually not a fair deal for investors and many investors won`t or will only do it for people they`re blindly in love with. In addition, Seth raises some interesting points about ecosystem health, although most entrepreneurs I know aren`t too worried about killing the goose that lays the golden eggs. However, once a price cap has been introduced, serial seed documents are a better solution to complete the first round for entrepreneurs and investors. · Finally, the use of serial boot documents increases transparency.

Since these documents are available online, any entrepreneur or investor can now sign a term sheet with the certainty that there will be no hidden “gotchas” at the next step in the process. · With minor manipulations, Series Seed allows several tortured and non-functional agreement-free card structures (a real problem for convertible bond documents); and most angelic condition sheets contain some basic confidentiality obligations (especially if the proposed investors have not signed a non-disclosure agreement). · Same point for speed. If the parties agree on serial seed documents, they should be faster than debt documents, as some negotiations take place with debt documents from demanding investors. Are you planning to raise funds? We`ve created a free online course to help you prepare to invest. Watch the Introduction to Investment Readiness and learn helpful tips, tactics, and strategies to prepare for your seed fundraiser. · First, these documents must be fair and not favour investors or entrepreneurs. Contrary comments or other suggestions for improvement can be made on the Series Seed blog.

and I undertake to regularly review the documents to take account of these comments. Carefully consider the pre-emptive rights granted to investors or any consent rights on future funding rounds. If you have multiple angel investors, you can create a corporate governance regime that includes an independent assessment of available alternatives and offers some protection against investor misconduct or opportunism. Ten years ago, a company had to raise a few million dollars to develop a new product and bring it to market effectively. Today, this amount is considerably lower. The advent of cloud computing, open source software, API platforms, and many other changes have reduced the cost of starting a new business. That`s why start-ups are now raising much less capital — and many investors have started to focus on this smaller startup investment — which typically ranges from $500,000 to $1.5 million. Another common misconception is that standardized seed investor agreements open up the legal field to everyone. While it is true that some parts of the law are automated and easier for the general public to understand, the law remains a complex field, and it is always advisable to call on a professional to accompany you on your way. Finally, it`s tempting to think that a standardized seed deal is what you need to convince an investor to fund your ideas.

However, most investors with sufficient quality to help your business will not be convinced by such a document. They also tend to discredit the option of returning the investment in the form of a convertible bond, although in many situations this is the most advantageous option for both parties. Serial Seed Documents are a standardized set of documents that can be used quickly and easily for a seed investment: to finance a business correctly, legally quickly and intelligently. From a startup founder`s perspective, a seed investor deal is almost always necessary when it comes to people or companies looking to invest in your idea. When writing, it`s important that the founder has some clear things in mind: if you consider the ongoing relationship between you and an investor to be a marriage, you can think of the term sheet as a prenuptial agreement, whether the term sheet is an angel investor or a venture capital (VC) investor. .