See how YC’s model term sheet would be reflected in actual agreements
Early in 2019, Y Combinator (YC) published a model Series A term sheet reflecting what YC considers to be “standard and clean” terms for a financing from Silicon Valley VCs. The term sheet is based on YC’s extensive experience investing in hundreds of early-stage startups.
In two years, Atrium attorneys have guided hundreds of clients through over a billion dollars raised in venture financings. To provide further guidance to founders, we put together a set of financing documents, based on the forms published by the National Venture Capital Association, to show how YC’s model term sheet would be reflected in actual agreements. These documents assume that the startup is set up as a Delaware corporation.
A set of preferred stock financing documents normally includes the following five agreements:
- Amended and Restated Certificate of Incorporation
- Preferred Stock Purchase Agreement (here)
- Investors’ Rights Agreement (here)
- Right of First Refusal and Co-Sale Agreement (here)
- Voting Agreement (here)
The Amended and Restated Certificate of Incorporation (A&R COI) creates the preferred stock and details the various rights, privileges and preferences that the holders of preferred stock will have, such as liquidation preferences, dividend preferences, voting rights, protective provisions, conversion rights, and anti-dilution provisions. Certain corporate features and rights are only effective if they are contained in a company’s certificate of incorporation. Prior to the closing of a financing, this document is filed with the Delaware Secretary of State and replaces a company’s existing certificate of incorporation.