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April 10th, 2012 In the latest example of VC chatter – wherein multiple venture capitalists simultaneously blog about a hot issue – the topic du jour is the debate between convertible debt and equity rounds. The spark came from a by founder Paul Graham (yes, he ) that declared convertible notes victorious since each of this summer’s YC class opted for them. This morning, several VCs have weighed in on the issue, so here’s what entrepreneurs and early-stage startups need to know about the debate.
Firstly, what is convertible debt and how is it different from a normal straight equity investment? Seth Levine
. . . → Read More: Equity vs. Convertible Debt: VCs Debate Shifting Investment Trends
October 22nd, 2011 We’ve completed our series on convertible debt and hope that you enjoyed it. If we ever get around to writing a second edition of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist we’ll be sure to include this as well. If you go to the resources section of Ask the VC we’ve included standard forms used in a variety of venture deals. As of this posting, we’ll include some standard convertible debt documents subject to the disclaimer that we aren’t you lawyers and make no reps or warranties with respect to these documents, so use at your own risk. Related posts (see original pos
. . . → Read More: Convertible Debt – Wrap Up
October 5th, 2011 Cap Tables (short for capitalization tables) are spreadsheets that show how much everyone owns of the company. You can get a stockholder ledger from your lawyer that will list all the stockholders and show how many shares or options they have, but I don’t consider that a cap table. For the past 25 years, I’ve used a simple form, mostly given to me by the partners I worked for when I first entered the venture capital business in the mid-80s, but with a few modifications by me over the years. Last night I put together a public read-only google spreadsheet that shows you a basic cap table in t
. . . → Read More: Cap (Capitalization) Tables — Example Spreadsheet
September 26th, 2011 There are many items useful to entrepreneurs on the site including:
- Example cap (capitalization) table spreadsheet
- Term Sheet Creator
- Non-disclosure Agreements
- Employment Agreements
- Stock Option plans
- Confidential Information and Invention Assignment Agreement for Employees & Consultants
. . . → Read More: Orrick – Start-Up Tool Kit – Term Sheet Creator – Start-Up Forms Library
September 26th, 2011 Yesterday I saw a Tweet from Chris Sacca fly by that prompted me to want to write a blog post helping entrepreneurs understand why they should push back against VCs asking for “super pro-rata” rights. I’ll explain what they are and why you should avoid them if you can. A primer on “pro-rata” rights Institutional investors will always insist on pro-rata rights. This is not something to be concerned about. All it says is that the VC has the right (but not obligation) to invest his/her proportion
. . . → Read More: Why Super Pro-rata Rights are Not a Good Deal for Entrepreneurs
September 26th, 2011 After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source” equity seed financing documents:
- TechStars Model Seed Funding Documents (by Cooley)
- Y Combinator Series AA Equity Financing Documents (by WSGR)
- Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document)
- Series Seed Financing Documents(by Fenwick & West)
My general opinion is that anything that makes
. . . → Read More: How do the sample Series Seed financing documents differ from typical Series A financing documents?
September 26th, 2011 …. I think this quote accurately captures the life-cycle of creating a simple set of documents for early stage investment. I’ve attached version 2.0 of the Series Seed Documents as well as a red-line showing the changes I’ve made from the original set. If you peruse the red-line, you will see that there are not many changes. That’s because there are not that many issues to negotiate in a simple equity financing. Of course, one could argue, that I’m just not taking comments I disagree with (or that nobody cares enough to comment),
. . . → Read More: Series Seed Financing Documents
September 26th, 2011 TheFunded Founder Institute has just released a new “Plain Preferred” term sheet with support of the blogosphere, including top-rated venture capitalist, Fred Wilson. Chris Dixon posted about for first round funding, which started an . Fred Wilson came out in support of , so TheFunded Founder Institute has engaged WSGR to author the exact template agreed on by various entrepreneurs and investors for anyone to use:
Plain Preferred Term Sheet:
The new “Plain Preferred” term sheet compliments . . . → Read More: Founders Institute: New “Plain Preferred” Term Sheet
September 26th, 2011 Y Combinator and Wilson Sonsini Goodrich & Rosati are happy to announce the Series AA Equity Financing Documents. Their goal is to make angel funding rounds for startups easier for both sides. These documents were originally created for YC-funded startups to use when raising angel rounds. They seem to have worked well in trial runs so far, so we’re open-sourcing them. While they may not be suitable for all situations, the goal was to make the terms fairly neutral. So while we would of course advise both parties using these documents to have their lawyers look at them, they provide a star
. . . → Read More: Series AA Equity Financing Documents
September 26th, 2011 By David Cohen: Today, just as I promised in the , we’re releasing the various legal documents that we use as a starting point for seed stage financing for our companies. We’ve now done a dozen or so of these, and we thought it would be useful to release the documents to the community. We think that they’re great model documents for an angel or seed financing in the $250k-$2M range. They represent a “light” preferred equity financing and have very simple terms that are generally “balanced” but if anything lean toward the entrepreneurs and represent a great deal of trust in them, which we thin
. . . → Read More: TechStars Model Seed Funding Documents
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