As a Series A investor who invests in startups outside of the Valley, it's hugely useful to have something like this (independent of us) that we can point to as to what's normal, especially for founders who don't necessarily have the network to help them.
Founder's (and lawyers) who've never seen a term sheet before will often argue against standard terms (which no mainstream VC would move on) and on the flip-side, bad VCs will often try and put onerous terms into term sheets which can hurt the startup in future fundraising rounds or liquidity events.
While there's been a huge increase in transparency at the pre-seed/seed/SAFE fundraising stage, Series A and beyond is still very opaque.
Great to see YC extending their work on transparency into the Series A stage!
How do we balance against an orthodoxy setting in? As a startup employee, it was unusual and impossible to ask for ISO options until recently. It's changing now. Why shouldn't there be terms in the agreement that felt perfectly reasonable a few years ago but seems unfair to the founder now?
A standard form should be a guidance. It shouldn't become an unquestionable text.
YC released the SAFE and then a few years later, after working with thousands of founders, thought it was too confusing to have a feel for ownership and conversion with pre-money valuation caps, so they moved to a post-money SAFE.
The SAFE itself has a few variations and you’re welcome to add/remove things as they make sense. With more complicated legal documents, like a Series A raise, of course people should adapt.
I wouldn't talk in absolutes because having a ton of negotiating leverage can make everything fair game. But in an run of the mill deal, it's pretty tough to make a VC give up anything that's not in brackets.
Ya. If you are blowing up and VCs are knocking down the door to throw money at you, you can write your own ticket. Look at Zuckerberg who was able to do many rounds of funding while maintaining total board voting control.
Generally from what I've seen in the market founders will typically either come around to accepting the terms or will raise money from non-VC source (corporates, PE funds, etc).
Founder's (and lawyers) who've never seen a term sheet before will often argue against standard terms (which no mainstream VC would move on) and on the flip-side, bad VCs will often try and put onerous terms into term sheets which can hurt the startup in future fundraising rounds or liquidity events.
While there's been a huge increase in transparency at the pre-seed/seed/SAFE fundraising stage, Series A and beyond is still very opaque.
Great to see YC extending their work on transparency into the Series A stage!