Most ECVC lawyers can recite from memory the basic architecture of venture anti-dilution protection. The standard NVCA formulation adjusts downward the conversion price of preferred stock when the company issues additional equity at a lower price, subject to a familiar list of “Exempt Securities.”
In straightforward scenarios where it’s clear what the price of that
The National Venture Capital Association’s October 2025 update to its model stock purchase agreement didn’t make headlines outside the venture bar, but it quietly did something meaningful: it formally incorporated tranched financing mechanics into the model documents. That might sound like a technical tweak, but it’s actually a recognition of how common milestone-based investments have
In the world of early stage investing, there exists a range of structures from the most founder friendly to the most investor friendly.
The most investor-friendly structure involves some type of a priced round in which the investor receives shares of a class of preferred stock with a negotiated set of enhanced economic, management and exit rights. These rights and other terms are memorialized in a group of governance documents and agreements among the company, the investors and the founders.
On the other hand, the most founder-friendly investment structure is the simple agreement for future equity, or SAFE, which is similar to a convertible note but notably lacks an interest component and a maturity date. Next along the range of investor friendliness is the convertible note, which contains several investor protections, including interest, maturity, some reps and warranties and (sometimes) security. In the real world, however, more sophisticated investors routinely augment their protection under both SAFEs and convertible notes by negotiating side letters that provide them with more enhanced rights.
Documentation for priced rounds and SAFEs have benefited from standardization. The National Venture Capital Association website open sources a set of standard Series A documents which are a convenient starting point for initial VC rounds. Ted Wang of Fenwick & West developed a set of standard Series Seed documents in 2010 for use in lower dollar amount priced rounds. Gust Launch, a SaaS platform for founding, operating and investing in startups open sources a slightly more elaborate set of Series Seed documents. And Y Combinator, which created the SAFE, open sources its several varieties of the SAFE on its website. Only convertible notes have lacked standardization and the efficiencies that come with it.
Continue Reading Planting Seeds: New Standard Convertible Note Could Disrupt Angel Investing
In the world of venture capital, there are certain investor rights that ensure the smooth execution of exit transactions. The primary such mechanism is the drag-along provision, under which one group of stockholders agrees in advance to sell or vote their shares in a sale of the company approved by another group of stockholders and/or by the board. Drag-along provisions often include a covenant by the drag-along shareholders not to sue over a drag-along sale, often including waivers of claims for breach of fiduciary duties. But are fiduciary duties of directors too important to allow them to be waived by stockholders? A recent Delaware Chancery Court decision puts guard rails on such waivers.
Continue Reading Too Big to Waive? Enforceability of Drag-Along Covenants Not-to-Sue2021 was a spectacular year for the American venture capital ecosystem, with VC
investments, fundraising and exits all setting new highs. That according to the latest PitchBook-NVCA Venture Monitor, the self-described definitive review of the U.S. venture capital ecosystem. Nevertheless, it is difficult to predict how 2022 will turn out for the VC industry,
2018 was a historically good year for venture capital in the United States in terms of dollars invested by VC funds in U.S.
companies, dollars raised by VC funds and dollar value of exits by VC-backed companies, according to the Venture Monitor for Q4 2018 published by PitchBook and the National Venture Capital Association. VC