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 (here)
- Preferred Stock Purchase Agreement (here)
- Investors’ Rights Agreement
- Right of First Refusal and Co-Sale Agreement (here)
- Voting Agreement (here)
The Investors’ Rights Agreement (IRA) is a document that details any specific rights given by a company to some or all of its preferred stock investors. Some rights are given only to a limited group of investors who meet a high threshold of preferred stock ownership, known as “major investors.” This agreement may include registration rights, information rights (e.g., periodic access to the company’s financials), a market stand-off or lock-up provision, rights to invest in future rounds of financing (i.e., pro rata or pre-emptive rights), and any other requirements that may be negotiated by a company’s lead investors.