RESOURCES

Simple Series A

Stage: Raise and FundTopics: FundraisingBy Jon O'Connell July 12, 2021

Closing a Series A financing requires significant investments of time and money. A startup founder can generally expect a Series A financing to take approximately 3 – 6 weeks to close (measured from the time the term sheet is signed until the lead investor’s wire is received). The legal fees for a Series A financing can easily be upwards of $50,000, as startups usually pay not just their own company counsel fees, but also the legal fees of counsel to the lead investor.

We developed the “Simple Series A” documents to address these two pain points.

The “Simple Series A” documents are an easy to use, standard set of Series A financing documents, which build off excellent existing open source resources provided by Y Combinator (YC) and the National Venture Capital Association (NVCA). We relied on the YC Standard Series A Term Sheet as our North Star because we believe it is a fair, middle of the road reflection of standard Series A terms that result when sophisticated investors and founders negotiate a deal. Our belief is backed up by the upwards of 200 priced, equity financing we have completed over the past three years for our clients.

Streamline the drafting process.

We have studied these deals in order to arrive at terms we believe are a fair reflection of market terms for a company’s first equity or priced financing round. We also utilized the industry standard NVCA model Series A financing documents as the base for these documents. The NVCA forms are a tremendous resource and have been relied on in countless equity financing transactions. However, these forms contain many footnotes, bracketed provisions and optionality which require the drafter to sort through. We sought to reduce the optionality found in the NVCA forms to streamline the drafting process, thereby reducing the time and cost associated with extensive drafting and negotiation of the principal financing documents.

The “Simple Series A” documents are intended for use by a company that is raising its first priced equity financing (Series Seed or Series A). There is optionality to address Simple Agreement for Future Equity (SAFE) or convertible note conversion, as we find many companies have either SAFEs or convertible notes outstanding prior to raising their first priced equity round. Additionally, these forms are intended for use by a company and lead investor that have agreed to use the YC Standard Series A Term Sheet (or a substantially similar derivation). Assuming your transaction is consistent with the use case described above, we believe significant time can be saved by agreeing to use these forms with your investor. These documents are intended to be used as is, without further negotiation or drafting, other than filling in blanks as applicable. While these documents do not eliminate the need for hiring experienced outside counsel, they should help reduce costs, similar to how developments like the YC SAFE have transformed pre-seed funding.

Review the Simple Series A Terms and Conditions and download the resources using the links below.

Simple Series A Terms and Conditions
These documents, forms, checklists, and other resources (“Resource Materials”) have not been reviewed or endorsed by Y Combinator or the NVCA.  These Resource Materials have been prepared for informational purposes and are not intended to (a) constitute legal, tax, or other professional advice, (b) create an attorney-client relationship, or (c) be advertising or a solicitation of any type.  Use of, and access to, these Resource Materials do not create an attorney-client relationship between the reader or user, and Crowell & Moring LLP (“C&M”).  To ensure compliance with requirements imposed by the IRS, we inform you that any discussion of tax matters or any other information on C&M’s GrowthStudio website or SimpleSeriesA webpage is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Your use of Resource Materials does not constitute tax or legal advice from C&M. The tax consequences may vary based on your particular circumstances. You are strongly encouraged to consult your tax advisor regarding the tax consequences to you of incorporating your business and the issuance of stock to you and other service providers. The Resource Materials should not be used as a substitute for consultation with professional advisors. You should seek legal and tax advice from attorneys licensed in the relevant jurisdiction(s) before relying on any of the Resource Materials. Each situation is highly fact specific and requires a knowledge of both state and federal laws and therefore any party should seek legal advice from a licensed attorney in the relevant jurisdictions.  Only your individual attorney can provide assurances that these Resource Materials – and your interpretation of them – are applicable or appropriate to your particular situation. C&M and its attorneys expressly disclaim any and all liability with respect to actions or omissions based on this website. While C&M is hosting these Resource Materials, they are yours to use at your own risk.  C&M and its attorneys do not assume any responsibility for any consequence of using these documents.  Companies should always work with outside counsel, whether using these documents or a separate set of forms, to prepare final versions of financing documents and assist with the closing of any financing transaction.  There are a variety of different documents and transactions structures which may be preferable to either the company or investors.  The content on this posting is provided “as is;” no representations are made that the content is error-free.  C&M makes no assurance these documents are the optimal documents or structure for your particular transaction.
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