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6 Steps to Effectively Managing SAFE and Convertible Noteholders When Raising Your Series A

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The proliferation of SAFEs and Convertible Notes (collectively, “Convertible Securities”) the past few years has given rise to a new problem when raising your Series A financing – “party rounds” with a lot of stakeholders who prove difficult to manage.

Prior to the introduction of the Y Combinator SAFE in 2013, the typical Series A company we worked with had anywhere from zero to ten Convertible Notes. Managing a large group of Convertible Noteholders wasn’t really a problem.

More and more, we are seeing Series A companies with a significant number of outstanding Convertible Securities. The range for Series A financings we have worked on in 2017 and 2018 has been anywhere from twenty to sixty Convertible Securities, with the majority being SAFEs. Total Seed financing has increased such that the range we are now seeing is a couple of million dollars up to around six million dollars.

We believe the increase in the use of Convertible Securities is due to two reasons:

  1. The development, adoption, and ease of use of convertible securities like SAFEs; and
  2. Series A financings taking longer to reach.

It is almost a given that a Series A financing is going to have a large number of Convertible Security holders that a company and its attorneys are going to need to manage. We have outlined our thoughts below on the best process for managing Convertible Security holders to ensure a smooth and efficient Series A closing.

A six-step approach for managing Convertible Security holders

Step 1: Set up an email distribution list
The first step is simple. Create a Convertible Security holder email distribution list. This will streamline future communications and save you from typing out individual email addresses and eliminate the risk of leaving an investor off an email or sending an email to the wrong person, which happens surprisingly often.

Step 2: Share the final, signed term sheet asap
Once you have your distribution list set up, send the Convertible Security holders the final, signed Series A term sheet. This puts your investor group on notice that you have secured a lead investor and should have a deal closed in the next 3–6 weeks. It also provides your investor group with a summary of the key Series A financing terms, which will help speed up their review of the Series A financing documents once those are ready.

Generally, we would not expect any correspondence or questions from the investor group on the term sheet, other than congrats on securing the term sheet. The Convertible Security holders should be excited their Convertible Securities will be converting at a discount or agreed upon valuation cap – it means they made a good investment.

Next, steps 3 and 4 both involve sending documentation to the investor group.

Step 3: Share initial changes
We recommend sending the investor group the drafts reflecting the initial changes from the lead investor’s lawyer, not the initial drafts prepared by company counsel. When sending these drafts you should note that they are not yet final but reflect the lead investor’s comments. You should also note that you expect to close in 2 -3 weeks and will be following up with the investor group with final documents and a request for signature.

Importantly this message is not an invitation to the investor group to provide their comments, but rather a way to show progress on the financing and give an expected timeline to close. The lead investor sets the terms – it would not be practical to negotiate on an individual basis with the 20 – 60 Convertible Security holders.

Step 4: Share the final version of redlines
Follow up with the final versions of the transaction documents and redlines showing any changes from the documents that were circulated as part of Step 3. You should also provide the investor group with the target closing date and let them know you will be sending an electronic signature request (e.g., DocuSign, HelloSign, etc.).

Some investors may require side letters or need specific changes to the financing documents, which is inevitable and will have to be taken up on a one-off basis. The vast majority will sign the documents as is.

Step 5: Send for investor signatures
Send the electronic signature request to the investor group and collect all Convertible Security holder signatures. If you are old-school you can send PDF signature page packets. Once you have all of these signatures in hand and have finalized any open points with your lead investor you are now ready to close your Series A financing.

Step 6: Send fully executed documents
This step is the only post-closing action item. Now that you have closed, do your investor group the courtesy of sending them the fully executed transaction documents. They will want these for their records and appreciate you handling this in a timely manner.

We have found the above approach to be an effective means for managing Convertible Securities stakeholders. The overarching principle is communicating early and often with Convertible Security holders.

Whether you adopt this approach or take a different strategy, the important part is getting all your Convertible Security holders on the same page. If you don’t, you run the risk of delaying your closing. No investor likes to be caught off guard with a last minute request to sign complicated documents.

This post is for informational purposes only and not legal advice. You should contact your attorney for advice regarding managing your SAFE and Convertible Noteholders, Series A financing or other matters. For more information on the authors and Atrium, see

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Jon O’Connell is a Partner and founding member of Atrium’s legal team. He advises startup clients on matters ranging from corporate governance, capital raising, commercial transactions, and mergers and acquisitions. He also represents venture capital funds in equity financings. From 2017-2019, he managed Atrium’s venture capital financing team which was one of the most active venture capital financing teams in the industry having completed over 100 preferred stock equity financings in that time period. Prior to joining Atrium, he practiced at Morrison & Foerster in San Francisco and Wilmer Cutler Pickering Hale and Dorr in Palo Alto. At these firms, he often acted as outside general counsel for hundreds of startups in industries ranging from foodtech to fintech. He joined Atrium in order to enhance the client experience through the application of technology and operational improvements. As one of the first attorneys to join Atrium, he helped pioneer the development of Atrium’s industry-leading legal technology tools that automate workflows like complex pro forma cap table generation. When he’s not working, you can find him caring for his newborn daughter, golfing, watching sports, or gardening his backyard where he grows vegetables and raises chickens. He’s also active in his professional networks often speaking at industry events like Tech GC’s Fullstack Conference. Jon received his J.D. from Santa Clara University School of Law and Bachelor’s Degree from the University of California, Santa Barbara.


Named one of The Recorder's 2018 Women Leaders in Tech Law, Nicole is Managing Counsel of Atrium’s Financing practice focusing on venture capital investment deals, mergers and acquisitions, capital markets, and general corporate work. As a key legal advisor to many of Atrium’s clients, her investment deals has a cumulative value in excess of $1 billion. In addition to her legal work, she’s an integral leader of the company who plays a big part in building the culture. This includes co-chairing Shades, Atrium’s black employee resource group, among other committees. Prior to joining the company, she practiced at DLA Piper and Cooley supporting both emerging startups and venture capital investors. Her experience includes working on major initial public offerings for leading Silicon Valley companies in internet services, social media, robotics, and more. She eventually made the switch over to Atrium to think outside of the box and help deliver legal services more efficiently through the use of modern technologies. In her downtime, she loves traveling, trying new wines, and going to Miami with her family for sun all-year around. (Their next destinations include Paris and London.) Nicole received her J.D. from Santa Clara University and Bachelor’s from the University of California, Riverside.

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