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TechStars Model Seed Funding Documents
Ever since David Cohen started TechStars, I’ve encouraged him to “open source” everything. We regularly get approached by people all over the world to talk about the program. We do – we tell them everything about what we do, how we do it, and why we do it. We share our documents with them. We try to help and support them.
We regularly get asked for the documents we use for doing early stage financings. I personally believe these documents should be able to be done on a single piece of paper and sealed with a handshake (or more preferably, a fist bump), but I’m generally alone in that view. So, we’ve worked closely with Cooley Godward Kronish, LLP (and specifically Mike Platt, who has been my go to lawyer and a close friend since I moved to Boulder in 1995) to put together a set of “Model Seed Funding Documents” that anyone can use.
There are five primary documents in the set:
Of course, these are just example documents so all legal disclaimers about usage apply (e.g. “do with them what you want, but we take no responsibility for your actions.”) That said, I think these are a great starting point for anyone doing an early stage financing.
Tagged, bookmarked, and starred. Thanks for sharing.
Ycombinator has some legal docs related to this:
http://ycombinator.com/seriesaa.html
I have a feeling they're eerily similar.
Brad this post is in direct violation of the full employment act for lawyers
What's next? posting an opinion letter actually clearly stating a position from an accounting firm?
Kidding aside, one thing I really do like even though its a small touch is each side paying their own legal fees. As an entrepreneur the tradition that the company pays the legal bills has always rubbed me wrong. I don't mind negotiating, but paying both sides just never seemed right.
Brad,
Thanks for posting these documents. Being able to read the entire document and seeing how they link together was a huge help in clarifying the gives and gets.
Every little bit of insight and transparency is a huge help to those of us currently out there trying to raise funds.
Thanks again!
Sean
Thank you… is it typical for all your ventures to incorporate in Delaware? We have been starting to incorporate some things in California. Are there any seed funding related issues there?
We encourage companies to incorporate in Delaware. The rules around corporate governance are well defined, well understood, and generally work for people anywhere in the US. While I can’t speak to any specific issues in California, the law is often murkier and less broadly understood by investors outside of California.
Bravo Brad! I agree that early stage deals should "be able to be done on a single piece of paper and sealed with a handshake." About five years ago, when I was running an early stage VC fund, I started work on a One Page Term Sheet. It took a couple years, and a hundred arguments to optimize, but now I think it's perfect. I've made dozens of investments on that single piece of paper and many other early stage funds and angel investors have copied and pasted the one page term sheet from my blog. To my surprise, the "one page term sheet" is consistently the highest traffic page on my blog. Here's the link: http://www.angelblog.net/The_One_Page_Term_Sheet….
Agree with Brad. Case law in DE is well known and easy to deal with. The big issue is that DE will turn around your document review in a day while CA can take several days.
There is a great post on this here: http://www.sachinagarwal.com/quick-compare-and-co...
There are some keen differences, although very similar in nature.
[...] Good Templates For Startups Published February 11, 2009 Venture Capital From Brad Feld: So, we’ve worked closely with Cooley Godward Kronish, LLP (and specifically Mike Platt, who has [...]
Excellent stuff brad. Thanks for open sourcing it!! What do you guys typically do for Founders Agreements at Tech Stars? Have had a few discussions with entrepreneurs both in Tech Stars and out that were bitten by not having one.
Wanted to toss my thanks into the ring. This is a great idea and an enormously helpful resource to us all.
[...] http://www.feld.com/wp/archives/2009/02/techstars-model-seed-funding-documents.html [...]
The answer depends on whether its an LLC or corp and what type of vesting arrangements are made. There is no standard / open sourced version of this right now.
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Very simple and succinct article. I would like to add one more resource to the list – 'Hire a professional to do it for you'. Financial modeling is a specialized job and it is better left to the professionals who understand the process inside-out. If you are looking to start your venture, you should be spending more time on your business model than on your financial model. It does not mean the financial model is any less important. However, that you know finance and that you are good at Excel do not mean you have to prepare the financial models yourself. Having said that, even if you hire the help of a professional modeler, it is highly likely you may have to spend with him, as much time as you would have spent, had you made it yourself. This is because, even though the modeler would have the knowledge of modeling process and perhaps even about your industry, your model is customized for your business and you are the person who knows your business the best. Therefore it is advised that you spend a lot of time with your modeler and get your model built. Business is about getting things done, isn't it?
If you are curious to know the kind of work financial modelers do or to read about different kinds of modeling techniques, you can visit http://www.financialmodel.net .
thanks for sharing it. it's really a big help.
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Excellent stuff brad. Thanks for open sourcing it!!
Excellent stuff brad. Thanks for open sourcing it!!
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It's good to know about these funding documents being presented as an open source to the public.
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The answer depends on whether its an LLC or corp and what type of vesting arrangements are made. There is no standard / open sourced version of this right now.
Great article thanks!
Very interesting approach to your article.
Thanks for clearing that up for us.
Nice one Brad real informatice article!
Hey,
Great post. I kinda stumbled upon your blog and now I've added it to my bookmarks. Interesting stuff.
Best,
Jeff
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TechStars released a set of model seed funding documents that they use as a staring point for their seed stage financings.
The model seed funding documents include:642-845 exam
Term Sheet. This sets out the terms 642-825 exam of the proposed seed investment into your startup and alsos include the proposed cap table (reflecting the seed investment).
Amended and Restated Articles of 642-436 exam Incorporation. Your startup will need to restate, i.e. re-do, the charter it originally filed with Delaware now that your startup will have more than one class of stock.
Bylaws. Think of this document as your startup’s Constitution. You may already have a set of bylaws, but consider upgrading to something like this now that your startup has an outside investor.220-701 exam
Subscription Agreement. While the term sheet is an outline, the subscription is the definitive agreement where your seed investor purchases the securities (preferred shares in the model docs) from your startup. It will contain various reps & warranties from both seed investor and startup company, along with transfer restrictions.
Board Member Election Consent. The model documents anticipate that the preferred shareholders will have the right to select 1 board member. The preferred shareholders elect this board member with this election consent.
Thanks for posting these documents. Really helped clear some things up!
Thanks for posting these documents – they have provided a great starting point for me!
Thanks for sharing
Has proven really helpful 
What excellent effort, Brad!! Thanks for sharing it.