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 (here)
  • Right of First Refusal and Co-Sale Agreement (here)
  • Voting Agreement

The Voting Agreement (VA) is a document in which the parties to the agreement (normally founders, any other major common stockholders, and the preferred stock investors) agree to vote their shares of stock in specific ways on matters such as the size and composition of the company’s board of directors. This agreement often includes a drag-along provision which contemplates that if the company’s board of directors and a certain number of stockholders agree to a sale of the company, then all parties to the agreement must vote in favor of such transaction.