Raising capital is a difficult, time-consuming task that can make or break your startup. We hope to relieve some of that stress by providing the following resources.
Glossary of terms that every entrepreneur should be familiar with when seeking venture financing:
accredited investor- a wealthy investor who meets federal securities regulations for net worth and income.
adverse change redemption- a right that allows the shareholder to redeem his/her shares if adverse happens to the company.
angel investor- an individual who provides capital to one or more startup companies.
antidilution- a contract clause that provides price protection for investors. Investor’s shares are repriced to a lower price per share if the company completes a financing at a lower valuation than a previous financing round.
barter element- the price at which a stock option may be exercised.
benchmarks- performance goals against which a company’s success is measured.
bridge loan – a short-term loan used by a company until it can raise more comprehensive, long-term financing.
buyout – the purchase of a company or a controlling interest of a corporation’s shares, product line, or some business.
cap – the valuation ceiling in a convertible debt deal.
capitalization table – a detailed description of all the company stock owners.
common stock – the type of stock that has the least amount of rights, privileges, and preferences; usually owned by founders and employees.
convertible debt – a loan given by an investor with the intent that it will later convert to equity instead of being paid back like a traditional loan.
due diligence – the process by which investors investigate and evaluate the details of a potential investment, such as an examination of operations and management and the verification of material facts.
employee pool – shares set aside to provide employees with stock options.
equity – ownership in a company.
fully diluted – a term defining that all rights to purchase equity should be in the valuation calculation.
lead investor – an investor who takes on a leadership role in a VC financing.
pay-to-play – a contract term that forces investors to continue to invest in future financing rounds or have their ownership position diluted.
postmoney – the value of a company after an investment into the company.
preferred stock – a type of stock that has preferential terms, rights, and privileges.
premoney – the value of a company before any investment.
stock option – the right to purchase shares of stock in a company.
syndicate – a group of investors.
Angel List is a social network platform that connects startups with early stage investors.
After 1.5 years, AngelList has seen…
- 8,000 intros. An investor has asked for an intro to a startup on AngelList over 8,000 times.
- 400 investments. A startup has been introduced to an investor and subsequently closed that investor over 400 times.
- 8 acquisitions. At least 8 startups on AngelList have been acquired.
Gust (formerly known as AngelSoft) is also a networking platform that connects startups with investors. Gust should be used as a complimentary service to Angel List, as it will allow you share information and managed relationships with investors more easily. Many organized investment groups use Gust to track their deal flow, so having a profile already created could help move the process along more quickly.
- Connects over 30,000 active accredited investors and more than 600 angel groups, venture funds and incubators,
- Used by over 4,000 startups a month as their standard vehicle for dealing with investors
The following information was taken from Ask the VC
Below you will find links to the standard forms of documents that the Foundry Group uses on all its financings. They were originally based on documents developed at Cooley and on the National Venture Capital Association (NVCA) model documents. They tailored them to fit their specific needs as US-based seed and early stage software / Internet investors.
Please note. You can use these resources for free at your discretion. Note, however that you take full responsibility for using these documents. We aren’t your lawyers and we give no warranties (express or implied) that they documents are any good or legally enforceable.
Foundry Group standard forms of documents:
- Series A Term Sheet
- Series A Preferred Stock Purchase Agreement
- Investor Rights Agreement
- Co-Sale Agreement
- Voting Agreement
- Series A Restated Certificate of Incorporation
The following documents are common M&A and Sale Documents that you might find / want to use, but we can’t vouch for them.
- ABA Form of Model Purchase Agreement
- Model Letter of Intent
- Term Sheet Stock for Stock Reverse Triangular Merger
These following resources are other standard forms of documents that are popular today.