111–120 of 172 posts
Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
Is anybody able to shed some light on the key differences between a seed term sheet and this Series A term sheet?
Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
E.g. if they put in 1M for 25%, do they legally receive the 25% of shares right away?
What's typical here? In terms of investor vesting relative to the founders.
Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
Are there any examples of these for the curious to read? I know it’s out of scope for the post topic but as someone who hasn’t read a term sheet before and is curious, I am also curious about reading a full series A sale contract.
As a Series A investor who invests in startups outside of the Valley, it's hugely useful to have something like this (independent of us) that we can point to as to what's normal, especially for founders who don't necessarily have the network to help them. Founder's (and lawyers) who've never seen a term sheet before will often argue against standard terms (which no mainstream VC would move on) and on the flip-side, b…
How do we balance against an orthodoxy setting in? As a startup employee, it was unusual and impossible to ask for ISO options until recently. It's changing now. Why shouldn't there be terms in the agreement that felt perfectly reasonable a few years ago but seems unfair to the founder now? A standard form should be a guidance. It shouldn't become an unquestionable text.
YC released the SAFE and then a few years later, after working with thousands of founders, thought it was too confusing to have a feel for ownership and conversion with pre-money valuation caps, so they moved to a post-money SAFE.
The SAFE itself has a few variations and you’re welcome to add/remove things as they make sense. With more complicated legal documents, like a Series A raise, of course people should adapt.
Open standards are a starting point.
Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
The post refers to the actual resulting contract (100+ pages) that the lawyers generate as a result of these terms. Are there any examples of these for the curious to read? I know it’s out of scope for the post topic but as someone who hasn’t read a term sheet before and is curious, I am also curious about reading a full series A sale contract.
It is typical that the term sheet results in ~5 different contracts: the Stock Purchase Agreement (through which the company actually sells stock), the Investor Rights Agreement, the Voting Agreement, the First Refusal and Co-Sale Agreement, and changes to the company's Certificate of Incorporation.
There are also sometimes opinions of counsel and other "ancillary" documents which are just as important but not typically negotiated as they're very standard.
It is mind-bogglingly routine that a company pays $30k to "expand" from the term sheet to definitive contracts, and then the VC firm spends an additional $15-30k++ (reimbursed by the company) to review that expansion to make sure the other firm did it right.
Question: do investors usually vest at the same rate as founders, or at all? E.g. if they put in 1M for 25%, do they legally receive the 25% of shares right away? What's typical here? In terms of investor vesting relative to the founders.
The question of whether they "legally receive the shares right away" can be a bit more nuanced, particularly in e.g. a transaction for a SAFE or convertible note.
Earlier quoted context omitted.
What are some of the fixed in stone parts of a series A that most vc will not move off of?
I wouldn't talk in absolutes because having a ton of negotiating leverage can make everything fair game. But in an run of the mill deal, it's pretty tough to make a VC give up anything that's not in brackets.
Question: do investors usually vest at the same rate as founders, or at all? E.g. if they put in 1M for 25%, do they legally receive the 25% of shares right away? What's typical here? In terms of investor vesting relative to the founders.