Over the past decade, I’ve worked with hundreds of early-stage entrepreneurs to help them move from concept to scale. In that time, we’ve been legal counsel to startups in various industries from food to fashion and ed tech to e-commerce. I’ve learned a lot about raising capital along the way. My goal here is to…

Historically, a company needed to raise at least a few million dollars to create a new product and introduce it to the market. Every year, more tools and services are released to the public, which have dramatically lowered the cost of launching a tech startup. However, the standard set of venture capital legal documents remained…

The Series Seed Term Sheet provides a summary of major deal points. Most negotiations between the entrepreneur and the investor will happen at the term sheet. If the investors are aligned on the term sheet, the drafting of the documents goes much smoother and quicker. Below is the standard term sheet. We will break down…

Unlike the pre-seed round where convertible notes or Simple Agreements for Future Equity (“SAFE”) are commonly used, Series Seed investors are purchasing preferred stock of the company and thereby becoming partial owners of the company. They are also entitled to key shareholder rights and additional shareholder rights specified in the Series Seed preferred stock documents….

The aggregate proceeds in the Series Seed docs is simply the total amount of money the company is setting out to raise in the round of financing. Entrepreneurs should consider a number of factors when establishing the aggregate proceeds. First, consider the amount required for the company to reach the next round of funding. The…

Unfortunately, the Securities and Exchange Commission (SEC) does not allow a startup to raise capital from just anyone. Startups should only fundraise from Accredited Investors. First, it’s important to understand some basic concepts. The general SEC rule is that if you are raising money, you need to register with the SEC—an incredibly expensive process. But…

How much is your company worth? It’s often the most important, most contentious (and often the most subjective) question in any negotiation between entrepreneurs and investors. At the seed stage, any attempt at valuation is highly speculative. Most companies have little or no revenue, a very early version of their product, only a tiny user…

What is a liquidation preference? A liquidation preference dictates the order in which investors are paid out upon a liquidity event. A liquidity event usually means the sale of a company or the majority of a company’s assets. In short, the liquidation preference determines how much the preferred shareholders will be paid from the proceeds…

A conversion is the right of preferred shareholders to convert their shares into common stock at any time. The most common conversion rate is 1:1, which means that one share of preferred stock will convert into one share of common stock. Once a preferred share is converted into a common share, there is no provision…

Voting rights is a governance term, which means it relates to who has decision-making power in the startup. On general matters, Series Seed investors vote on an “as-converted basis.” For the purposes of voting on general matters, the preferred shares are treated as if they are converted into common shares for vote tallying purposes, but…