Redline - Series Seed v. Series Seed to Series A COI
Redline - Series Seed v. Series Seed to Series A SPA
Redline - Series Seed v. Series Seed to Series A IRA
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Neither I nor Fenwick & West, LLP assumes any responsibility for any consequence of using these documents. These documents have been prepared for informational purposes and is not intended to (a) constitute legal advice (b) create an attorney-client relationship (c) be advertising or a solicitation of any type. Each situation is highly fact specific and requires a knowledge of both state and federal laws and therefore any party should seek legal advice from a licensed attorney in the relevant jurisdictions. Both I and Fenwick & West expressly disclaim any and all liability with respect to actions or omissions based on this website.
One of the most difficult decisions in creating the Series Seed Documents was whether to make them a very simple version of traditional Series A documents or a more radical departure from the traditional format (to the extent that corporate finance legal documents can be referred to as radical).
I opted for the latter approach for a number of reasons. First, I thought it would be best to make these documents as simple as possible. Second, I wanted the documents to human readable (as opposed to lawyer readable) and there are certain provisions of a vanilla set of Series A financing documents that are just too dense for most civilians to get through (e.g. price based anti-dilution). Third, although the more simple documents require more tweaking in the next round of financing, that next round of financing should be a bigger round with resources where such investment would be appropriate. Let’s imagine that using the more simple documents saves 10% of the time and money involved in a seed financing. Even if it takes 20% more time to add a full set of provisions in the next round, that’s a good deal because (a) fewer than 50% of seed financed companies make it to the next round and (b) the dollars in the next round are less dear at that time, since it is a larger fundraising.
Accordingly, in this post I’ve attached a sample of the Series Seed Documents with a traditional set of financing provisions added.
What these documents are:
So the purpose of these documents is to give a legal practitioner an example as to how to drop traditional financing terms into the Series Seed Documents. I based these documents off a recent transaction where a company that had used the Series Seed Documents raised a Series A round. As expected, that deal took a bit longer than it would have had the Company raised a vanilla Series A to begin with (and subsequently raised a Series B) but the aggregate fees for the two transactions were still less than the standard Series A followed by a Series B. Moreover, with a good roadmap to follow, these costs elements will decrease over time.
What these documents are NOT:
It is important to note that these documents are just intended to be instructive as to how to go from a Series Seed to a Series A. I am not intending to standardize Series A terms. For this reason, I’ve not included a Right of First Refusal and Co-Sale Agreement or a Voting Agreement, both of which are typical in a Series A financing. It should be noted that the Drag Along and ROFR provisions in the Series Seed Documents should wind up in the Voting and Right of First Refusal Agreement, respectively so they appear to be deleted from these documents. Also, I’ve gotten a lot of request to post other form documents online. Keeping a full library of up to date form documents that comply with various state requirements is way out of scope. The Series Seed project is about standardization of a simple equity financing transaction. I do not intend to go beyond that.
Additionally, these documents are not version 2.0 of the Series Seed Documents. I will have that out by the end of summer. I’ve received numerous helpful comments both on the blog and via email and if you have any more to share, please do so.
How’s it going otherwise?
I've gotten very good feedback from my partners and other practitioners about the Series Seed Documents. I’ve used these documents a number of times in my own practice and I can tell from the statistics at www.SeriesSeed.com that many folks have downloaded them. If you have any success stories to share, let me know. I'd love to hear about it.
My expectation around these documents is that they will take about 5 years to gain mainstream adoption. Even with my great launch partners using them, it takes time for a new standard to emerge. I'm hopeful that tools like this Series Seed to Series A roadmap, will help make that happen. If you have any suggestions, let me know.
Kudos to my bud Ted for pushing this great project forward. It's a real service to the entrepreneurial community in general, which we both care deeply about. After reviewing the Series Seed docs, I plan to use them for my next Seed deal...
Posted by: DaveCappillo | 05/24/2010 at 06:21 PM