Yes. Most startup rounds have more than one closing. A SAFE round closes investor by investor, and priced seed and Series A rounds usually allow additional closings for a set period after the first close. The rules for later closings are simple: same price and terms, a cap on the extra shares, an outside date, and a clear rule on who approves new investors.
Key takeaways
- In a SAFE round, every signed SAFE plus its wire is its own closing.
- Priced rounds commonly allow additional closings for up to 90 days after the first close, on the same terms.
- Never take an investor’s money before they’ve signed. The signature comes first, then the wire.
- Later closings don’t require new diligence. Later investors rely on the lead’s diligence and the company’s representations.
What is a closing?
A closing is the moment an investment becomes final: the documents are signed, the money arrives, and the investor receives their security (a SAFE, a note or shares of preferred stock). A round can have one closing or several.
How do closings work in a SAFE round?
A SAFE round has no group closing. Each SAFE is a separate contract, so each investor’s signature and wire is its own closing, and you can sign investors one at a time as they’re ready. Before you start, the board approves the SAFE form, the cap and the maximum total amount of the round. See SAFE.
If demand is stronger than you planned and you want to raise more, say $750,000 instead of $500,000, the board adopts a new consent approving the larger amount. The SAFEs you’ve already signed don’t change. See Startup Board Consent.
How do additional closings work in a priced round?
In a priced seed or Series A, most investors usually sign at the first closing, often led by the lead investor. The stock purchase agreement then lets the company sell more shares of the same series in later closings. A typical additional closing clause covers four things:
- A share cap. The investors have a target ownership, so the agreement limits how many more shares can be sold in later closings.
- An outside date. Later closings must happen within a set period after the first close, often 90 days and sometimes up to 120 days, so everyone knows when the cap table is final.
- Same terms. New investors buy at the same price and on the same documents as the first-closing investors.
- Approval of new investors. The board, the lead investor, or both may need to approve who comes in.
This is how you handle the classic problem of a round that is mostly committed while a few investors are still finishing their own approvals. Close with the committed group, take their money, and bring the stragglers in later.
How long does a priced round take to close?
A clean priced seed round usually takes about four to eight weeks from a signed term sheet. Most of that time goes to investor counsel’s review, the company’s diligence responses, and collecting signatures. A SAFE can close in days.
What slows rounds down is predictable: messy records, missing IP assignments, undocumented equity promises, and old SAFEs or notes that nobody put on the cap table. Fix those before you sign a term sheet. See Startup Due Diligence.
Can an investor wire money before signing?
No. The investor should sign the SAFE or the signature pages first, and wire after. Money that arrives without a signed agreement is an undocumented obligation of the company. You don’t know exactly what the investor bought, and you have a securities sale with no paperwork behind it. If an investor will be traveling or unavailable, get their signature now and take the wire later, not the other way around.
Do SAFE holders sign the priced-round documents?
The SAFE converts automatically in the priced round, so SAFE holders don’t need to agree to the conversion. In practice, though, the company usually asks them to sign the stock purchase agreement or a joinder so they’re bound by the same representations and transfer terms. SAFE holders who will qualify as major investors also sign the investors’ rights agreement and voting agreement. Plan for these signatures at the start of the closing process, because SAFE holders are often the hardest signatures to collect.
How do I keep signature pages from delaying the closing?
Most first closings are conditioned on all of the lead’s investors signing at once, so one missing page can hold up everyone. A few habits help. Have counsel collect signature pages in escrow, to be released when the closing happens. Use e-signature with each investor’s name and amount pre-filled. Put a target closing date in the term sheet. Confirm wire instructions by phone before anyone sends money, because closings are a favorite target for wire fraud. And update the cap table the day the closing happens.
What filings follow a closing?
Depending on the type of fundraise, you may need to file a Form D and state blue sky filings. See What Comes After Fundraising?
Go deeper: For a full walkthrough, see our Founder’s Guide to SAFEs and Founder’s Guide to Seed Funding.
For more on the documents in a priced round, see Series Seed vs NVCA Documents. If you’d like help running a SAFE round or closing a priced round, see our SAFE and Series Seed services or contact us.
