Future Rights in the Series Seed term sheet give the investors the same rights if the new investors in a subsequent round of financing get better rights. This means that if the new investors in the subsequent round of financing successfully negotiate for better protection, the Series Seed investors will receive the same level of protection. This applies to both pre-existing rights the Series Seed investors enjoy as well as rights that are not covered in the Series Seed term sheet.
For example, if the Series Seed investors secure a 1x nonparticipating liquidation preference in the seed round and the new investors in the subsequent round of financing get a 2x nonparticipating liquidation preference, the preferred shares in the Series Seed round will be entitled to a 2x nonparticipating liquidation preference. When using the Series Seed set of documents, a lot of rights that the new investors might ask for are not covered, such as registration rights or price-based anti-dilution. This Future Rights term ensures the Series Seed investors will also get these rights. For example, there is no price-based anti-dilution in the Series Seed term sheet. If the new investors successfully negotiate for broad-base weighted average anti-dilution, the Series Seed investors will also get the same anti-dilution protection.
The Future Rights entitlement will be adjusted in accordance with the number of shares each Series Seed investor holds after the new investment. It merges the differences between the Series Seed round and the subsequent financing round to create a single set of preferred shares with an identical set of rights.This term aligns with an earlier term Participation Rights which provides the Series Seed investors the right to participate in the subsequent round on the same terms as the new investors.
In the Series Seed term sheet, the future rights are as follows:
Future Rights: The Series Seed will be given the same rights as the next series of Preferred Stock (with appropriate adjustments for economic terms).
Thus, the investors will be receiving the same preferences of the inventors in the next round.