Priced rounds in US - cumbersome - best to avoid

US InversionInversion
Files & media

Priced equity rounds require significantly more legal documentation and consideration versus SAFE/Convertible Notes. Here's a checklist for the documents required in such scenarios:

Checklist - Priced Equity Round in US C-Corp

Charter Documents:

  • Certificate of Incorporation - Official legal existence of corporation
  • Bylaws - Governance rules of company operations
  • Board Resolutions - Formal approval mechanism for actionsComplexity: State approval delays, stamp duties
  • Amend State Certificate for Authorized Share increase

New Investment Paperwork:

  • Stock Purchase Agreement- Investor share subscription terms
  • Investor Rights Agreement – Rights related to info access, board seats etc
  • Co-Sale Agreement - Investor liquidity clauses via tag along rights
  • Voting Agreement - Decision making clauses allocation Complexity: Balancing investor rights protection vs startup flexibility

Existing Shareholder Agreements:

  • Amendments in ROFR, Founders stock purchase rights
    • ROFR, Purchase rights - Reconcile if founders/employees had preferential terms earlier Complexity: Work through objections within cap table participants
  • Integrate with new investor rights

Cap Table Changes:

  • Blueprint revised capitalization table
  • Issue new stock certificates to investors Complexity: Tracking detail ownership data across participants
  • File 83(b) elections, returns

HR, IP, Operational Agreements:

  • ESOP Plan – More shares reserved dilutes existing grants impact
  • Customer/IP Contracts – New clauses may trigger renegotiation needs Complexity: Cascading amendments in affiliated agreements
  • Update Director appointment records

Even with standardized templates like NVCA documents, negotiating priced rounds is complicated, expensive and time consuming exercise for startups. Maintaining SAFE/Convertible Note flexibility early on is key.