Standardized Venture Funding Docs
There was a lot of noise in VC/startup land earlier this week about the Series Seed documents that can be used to close a seed round. Marc Andreessen told PE Hub:
It’s like open source software. If it’s developed by IBM, there’s no
reason for another company not to use it. The documents aren’t owned or
controlled by Fenwick. Fenwick isn’t getting paid for them. I don’t
think there’s a reason for another attorney not to use them, except if
they’re concerned over reduced billings. Lawyers have a financial
incentive to make things more complicated because they are paid more.
I'd like to differ with Marc on this one. First, as Brad Feld points out, there are now four sets of "open source" seed documents:
- TechStars Model Seed Funding Documents (by Cooley)
- Y Combinator Series AA Equity Financing Documents (by WSGR)
- Founders Institute Plain Preferred Term Sheet (by WSGR)
- Series Seed Financing Documents (by Fenwick & West)
I will add a fifth of sorts; Gunderson has set up a "Simple Series A" set of forms that our firm has used a few times. I am not aware that they have been published on the Internet yet though.
There are no shortage of "standard forms" out there. TechStars uses one set. Y Combinator uses another. Founders Institute uses a third. Andreessen Horowitz uses a fourth. And USV and other firms uses a fifth.
The problem, as Brad Feld points out, is that nobody has done the work to get all the various players in the room and standardize on one form. Ted Wang showed me the Series Seed documents last year and while I am hugely supportive of his intent here, I can't and won't get behind the Series Seed forms because they leave out some critical stuff that we simply won't do a deal without.
I guess it's like open source software in that there are many flavors of it out there. One project might choose MongoDB for their project. Another might choose Cassandra. A third might choose Hadoop. All will get the job done and all are open source. But each one has its strengths and weaknesses and there is no standard. That's ok with me as long as everyone understands it.