Community Enterprise Clinic

This practice note discusses venture capital, which is an important source of money for start-up companies that do not have access to the capital markets. It covers what venture capital investors look for as well as the process of seeking and obtaining venture capital support at the various stages of a start-up’s growth.

An overview of the most common venture financing instruments used in a startup's capital raising lifecycle. This Practice Note examines seed-round investments by friends and family or high-net-worth angel investors in common stock, preferred stock, convertible notes, and simple agreements for future equity (SAFEs). It discusses a startup's first institutional round of financing (the Series A round), typically led by an early-stage venture capital (VC) fund or group of super-angels. It also discusses investments by institutional VC funds in later financing rounds (the Series B and Series C rounds) and by growth-focused private equity funds (the Series D round). In addition, this Note discusses later-stage bridge financings and venture debt.

An overview of the seed round of financing for early-stage startup companies. This Practice Note describes the most common types of seed-stage investors, including friends and family, high-net-worth angel investors, and super-angels. It also provides an overview of the most frequently used types of seed financing instruments, including convertible notes (also referred to as convertible promissory notes, bridge notes, or convertible debt), simple agreements for future equity (SAFEs), Series Seed convertible preferred stock, and common stock. The Note analyzes some advantages and disadvantages of each seed financing instrument, helping company counsel better advise startup founders on choosing the instrument that best fits their company's needs.

Use for Debt Version.

Generate a Tool Sheet.

Generate a Term Sheet.

Features Equity Version.

Generate SAFE: Cap, no Discount; SAFE: Discount, no Cap; SAFE: Cap and Discount; SAFE: MFN, no Cap, no Discount.

Features Convertible Security Financing Term Sheet, Convertible Security Purchasing Agreement, and Convertible Security.

Use for SAFE: Primer, SAFE: Cap, no Discount; SAFE: Discount, no Cap; SAFE: Cap and Discount; SAFE: MFN, no Cap, no Discount.

Use for Promissory Note and Revenue Loan Agreement.

Use for Term Sheet, Restated Certification of Incorporation, Stock Investment/Purchase Agreement, and Investors' Rights Agreement.

Use for Term Sheet, Restated Certificate of Incorporation, and Stock Investment/Purchase Agreement.

Resource for Term Sheet, Stock Purchase Agreement, Amended and Restated Certification Of Incorporation, Investors' Rights Agreement, Voting Agreement, Right of First Refusal and Co-Sale agreement, Management Rights Letter, and Indemnification Agreement.