
A Standard and Clean Series A Term Sheet - akharris
https://blog.ycombinator.com/a-standard-and-clean-series-a-term-sheet/
======
ig1
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!

~~~
8ytecoder
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.

~~~
tyre
Yes and they aren’t unquestionable.

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.

Open standards are a starting point.

------
rsweeney21
Former founder here. I wish I had had this when I was raising my series A. I
lost control of the board at my series A when the VC said that a 2-2-1
structure would be better for everyone. 13 months later, I was fired from the
company I had started. The risks are real.

Had I known what a standard, clean series A term sheet looked like, I could
have just pointed to this term sheet on ycombinator.com and said - "Make it
like that."

I've found the Y Combinator resources to be some of the most valuable
resources out there for startup founders. Do yourself a favor and familiarize
yourself with what is available. It could help you not get fired from your
startup.

~~~
xodast
Could you link to some of these resources , their start up school doesn't
really include documents such as this.

~~~
allenleein
Here you go:

[https://www.ycombinator.com/resources/](https://www.ycombinator.com/resources/)

------
55555
Can someone please help me understand what common re-vesting schedules are for
founders? Like, if I raise seed money, surely I'll have to agree to a
reasonable 4-year vesting schedule. But then if I raise a series A, B, and C,
do I have to agree to new vesting schedules at each raise? Will I then not
fully vest until 4 years after my series C? Do I lose all my vested shares at
each raise? On the one hand re-vesting seems unfair to me, but on the other
hand if I were to give someone 20 million dollars I wouldn't want them to quit
the next day.

Also, sometimes you hear about founders being fired by their board. In this
case, are they getting fully vested or are they just leaving with the equity
they had vested at that point in time?

~~~
jasonkwon
Re-vesting schedules are all over the map.

Some amount of re-vesting is often required at Series A, but it largely has to
do with how vested the founders already are. If for example they've been
working on the company for only a year, the existing vesting schedule will
probably be left alone. On the other hand, if they've been working on the
company for multiple years and are close to fully vested at Series A, it's
almost guaranteed that the Series A investor will ask the founder to re-vest
some amount of shares (for the reason you describe).

Re-vesting generally does not show up again after the Series A.

If you get fired before you fully vest, whether you leave with the equity you
have or all your equity is something you can negotiate as part of the vesting
terms.

~~~
55555
Thanks Jason

------
akharris
Jason and I are happy to answer any questions people have about this document:
why we included the terms we did, how to think about using, etc.

~~~
pbiggar
My reading is that this includes a pre-money option pool (aka the "option pool
shuffle": [http://venturehacks.com/articles/option-pool-
shuffle](http://venturehacks.com/articles/option-pool-shuffle)), which while
standard feels dirty.

Any thoughts on this?

~~~
jasonkwon
We send people that link all the time to help them understand option pools.
The main point of that post is to make it clear to founders that when an
investor is saying they'll invest $X to get 20%, the dilution is more than 20%
because of the impact of the pool.

I think if the pool is not part of the premoney, investors just adjust the
valuation to compensate.

Just focus on the final output. Take the term sheet and work with your lawyer
to model out how much you own after the round is closed. Is that a good deal
or not? If you don't like it, there are multiple ways to increase your post-
closing ownership. Moving the option pool into the post-money is one of the
hardest ways to accomplish that because you are trying to move the investor up
on both valuation _and_ convention.

~~~
pbiggar
The last 2 rounds I was involved in moved the option pool into the post-money.
In one case, the initial price was initally discussed and negotiated with the
expectation of a post-money option pool. In the other, there was a term sheet
with a post-money option pool so we asked the other term sheets to be
rewritten using a post-money option pool (they changed their prices
accordingly).

I'll note that in every case where someone has asked for X pre-money, they
have asked for less than X in the post-money. That's why I consider that term
to be dirty - it's purely a means of obscuring the real valuation, and has
nothing to do with employee ownership.

------
HoyaSaxa
This term sheet template is very investor friendly primarily because of the
lack of detail.

The Company has very little leverage after a term sheet is signed especially
given a standard no-shop provision. You want to reduce the number of items
that need to be negotiated later in the process as much as possible.

This not only reduces the likelihood of having to agree to a less than
favorable term that was not addressed in the term sheet, but also reduces
legal costs (which the Company is paying).

The post does make note of this:

> Some great investors still send longer term sheets, but this has more to do
> with their preference for going a bit deeper into the details at this stage,
> rather than deferring this until the definitive documents. The definitive
> documents are derived from the term sheet and are the much longer (100+
> pages) binding contracts that everyone signs and closes on. It’s common to
> negotiate a few additional points at this stage, though deviation from
> anything explicitly addressed in the term sheet is definitely re-trading.
> Also, in a few places, this term sheet refers to certain terms as being
> “standard.” That may seem vague and circular, but term sheets frequently do
> describe certain terms that way. What that really means is that there’s an
> accepted practice of what appears in the docs for these terms among the
> lawyers who specialize in startups and venture deals, so make sure your
> lawyer (and the investor’s lawyer) fit that description.

~~~
jasonkwon
Theoretically this would appear to be true.

In practice, the firms that give 1-pagers don't really try to pull a bait and
switch like that. They offer the 1-pager so they can close quickly, not so
they can get quickly into the no shop to drive onerous terms. Could a firm
consciously adopt that strategy? Sure, but it wouldn't last very long because
people talk to each other.

Also, even the 1-pager goes into detail on liquidation preference, veto
rights, board composition, drag-along and founder vesting. These are the items
that get negotiated a lot or are otherwise really important to know before
signing up.

As mentioned elsewhere, this exercise was descriptive, not prescriptive. Some
of the founder friendliest investors use term sheets that look similar to
this. Some of the unfriendliest investors still send 10 page term sheets.

------
nemo1618
Pet peeve of mine: You should never take a raw screenshot of a Word doc, with
its red and blue underlines, cursor, etc. Convert it to a PDF first or find a
way to turn off the highlighting+cursor.

~~~
seancoleman
Better yet, embed the PDF in an inline iframe so text can be copied,
highlighted, etc.

~~~
akharris
A downloadable version of the doc is linked directly above the image. That
does the job nicely, since it allows you to immediately edit.

~~~
sunsetMurk
newer browsers can actually just embed PDFs natively[0] in an iFrame, but
there are more fault-tolerant ways to do it that provide a better ux.

Cool note, Google Drive provides an embed code for PDFs[1] which I've found to
be useful.

Filestack also provides a great API for viewing PDFs in apps/browsers[2] that
I use all the time.

0- [https://pdfobject.com/static/](https://pdfobject.com/static/)

1- [https://alicekeeler.com/2016/06/05/google-drive-embed-
pdf/](https://alicekeeler.com/2016/06/05/google-drive-embed-pdf/)

2-
[https://www.filestack.com/docs/concepts/transform/#document-...](https://www.filestack.com/docs/concepts/transform/#document-
viewer)

------
rexreed
Curious to know what the "typical" ranges are for some of the bracketed
sections:

* What are typical / optimal post-money option pool sizes?

* What are typical / optimal founder vesting schedules?

* What are the usual ratios of lead investor / follow-on investor amounts?

It seems that the majority of the Preferred can vote to change the # of
directors - wouldn't that offset the initial founder-friendly board setup or
am I missing how that vote is used?

~~~
akharris
Ranges we see:

 _Option pools: 10-15%_ Vesting: If there are new rules here, they are around
re- vesting and highly dependent on how long the company has been around.
*Ratios: A bit harder to say, but the lead is usually taking a significant
majority of the round.

------
acjohnson55
Do "A Standard And Clean Employee Equity Offer" next!

Seriously.

~~~
tanitall
I concur. Do you concur?

------
motohagiography
This is so valuable, just to have a reference point to ask, "so I've seen
other sheets with X, what's the case for your preference?"

I have neither raised or invested, but do a lot of negotiations and having an
external reference for framing discussion creates a lot of value. Seed is
still in front of me, but these templates remove a lot of friction.

I was going to not-comment because it was just good news, but in case there
was doubt, this is great.

------
johan_larson
Is this term sheet descriptive or prescriptive? Are you telling us what
standard straight-forward terms _are_ right now, or what they _should be_
right now (and would be, in a slightly better world)?

~~~
jasonkwon
descriptive, but note the comment about the brackets.

------
tschellenbach
The only surprising bit for me was the dividends. Most terms sheets I've seen
don't require the 6% dividend. Seems weird.

~~~
pedalpete
I was surprised by the % being included as I figured that would be decided by
the board at the time a divindend is approved. I have no idea why a % which
would be defined before knowing the details of the companies financial
situation.

I wonder if this is more of a protection against the board deciding on a
dividend when it is in the best interest in the near term for the company to
keep money in the bank. So defining 6% might mean "this company has so much
cash that they can return a 6% dividend without harming the long-term
potential". Perhaps if you aren't able to return 6%, you aren't ready to
return a dividend at all?

~~~
hobbyjogger
The dividend provision just says that the common won't get a dividend unless
the preferred has already received their 6% (per year). It doesn't mean that
you couldn't issue the preferred a smaller dividend--that would just count
toward the 6% but still wouldn't allow the common to get a dividend until the
remainder is paid out to the preferred.

It's relatively rare for venture backed startups to issue ordinary course
dividends anyway (for the reason you stated, funding development/growth is
typically seen as a better use of company cash to try to get to a big exit or
IPO, etc.).

~~~
jasonkwon
Yes, this.

------
adventured
Now switch the preferred shares to common shares and eliminate all liquidation
preferences and you'd have something closer to a fair term sheet template.

No young start-up should ever agree to preferred shares or any liquidity
preferences. This is the next great battle for founders to win over venture
investors. To push that risk back onto the investors where it should be
instead of allowing the investors to unduly offload even more of their risk
onto the founders and early employees.

Liquidity preferences should have never become common with start-ups, they
should be quite rare. There is no more important territory for founders to be
focused on taking back from venture capitalists than that. Liquidity
preferences are a routine source of screwing over the founders and early
employees. YC could do something tremendous for founders by fighting on their
behalf to put that shifted risk back where it should be: with the investor;
the founders and employees already shoulder enough risk as it is.

~~~
foobiekr
Not sure why the downvotes. The reality is preferences are what poisons
employee equity grants and is what ends up surprising people when startups end
in any way other than spectacular success.

It’s unrealistic to do away with the common/preferred split, but protecting
founders and perhaps some key employees as well as banning any kind of
participating preferences or ratchets is a good place to start.

~~~
sonnyblarney
1x preference I think has meaning and it's reasonable.

Basically, the VC's are 'getting their money back first' \- after all, they
put the money in.

So if they put $1M in and the company sells for $1M ... should they only get
$200K back? Or their $1M? Is the question.

Arguments can be made either way, but a 1x preference I think is something
quite fundamentally different from multiples of preference.

------
anonu
This is extremely useful. Most importantly, I am glad that they included
examples of what is non-standard. These are the real curveballs that are
difficult for first-timers to gauge. whether they are "normal" to have on a
term sheet or whether they're getting squeezed without really knowing.

~~~
privateSFacct
Over 1x participating preferred I've seen a few times. A TOTAL nontransparent
scam in my view.

------
logicallee
Could someone here talk more about the "no shop" clause, which seems 100%
geared toward giving a buyer better than a competitive price. But, the
document says it is the only term that is legally binding!

How is "nothing in this document is legally binding and the buyer doesn't have
to buy, EXCEPT for the term that the seller may not talk to any other buyers
in any way." What kind of sense does that make? Would you "accept" an offer to
sell your car that says it isn't binding in any way except that you may not
talk to anyone else about selling your car to them, for the next 30 days?

Also since it says it is "legally binding" what are the remedies? What is the
history of such a term?

Why would founders agree to it and actually follow it?

------
mhb_eng
One potential modification would be to add some language to the No Shop clause
to allow the lead investor to approve any other conversations about the round.
This can be helpful when the Series A round is larger, as the diligence by
separate investors can proceed in parallel.

------
Lordarminius
This may seem like a slightly out-of-place question, but is there any
equivalent term sheet for seed funding ?

~~~
akharris
Our safe docs are pretty good for this:
[https://www.ycombinator.com/documents/#safe](https://www.ycombinator.com/documents/#safe).

~~~
tosh
iirc the SAFE doesn’t cover vesting, information rights and control rights (I
guess this is because typically companies that YC invests in are set up with
something like Stripe Atlas or similar?)

In many European hubs the typical term sheets for seed financing are provided
by Angels or seed stage VCs and typically aren’t as founder friendly as in the
US.

Having more information/a recommended seed term sheet from YCombinator that
explicitly covers the above (or references Stripe Atlas) would help.

Really appreciate all the documents and context that you are publishing. The
impact is vast and goes way beyond the Valley and the immediate YC network.

~~~
ericd
AFAICT, the norm with SAFEs is that they're very hands off in terms of company
operations, at least in SV.

~~~
tosh
ty for the clarification ericd

------
wasd
* What should someone do if they get push back from an investor when asked to this term sheet?

* If this term sheet is used, can we avoid the legal costs of a Series A?

~~~
jasonkwon
It’s meant to provide transparency on what good and clean terms are. It won’t
generate negotiating leverage for you if you don’t have any, though on the
margins it might help you persuade someone that a term is “market.”

Most of the legal costs don’t arise from the term sheet. They come from legal
diligence and drafting the definitive docs.

------
vxNsr
I love this line:

    
    
        Company: [_______], A Delaware Corporation.
    

Because no one is gonna incorp anywhere else. Despite 90% of SV companies
starting in California.

~~~
akharris
It doesn't matter where the company raising an A started, it is usually
incorporated in Delaware. If the company incorporated elsewhere, it will
almost always reincorporate in Delaware prior to raising an institutional
round.

This isn't true for certain international jurisdictions, but within the US, it
is a near certainty.

~~~
vxNsr
Right, I just thought it was a funny quirk of our legal system.

~~~
jasonkwon
Network effects don't just exist in tech.

Delaware has the most developed corporate law and support services for
corporate transactions (you can file charters, mergers, etc. within an hour
there; good luck doing that in most other states, including CA). Every company
that incorporates in Delaware adds further value to every other company that's
in Delaware. Each marginal company adds to the Delaware legal corpus and
support structure because (1) it ensures Delaware has the greatest variety and
largest supply of potentially significant corporate legal cases, which means
it has the greatest variety and largest supply of actually adjudicated cases
and thus developed and stable law, and (2) it pays Delaware annual fees for
those support services. This in turn attracts more companies to incorporate
there because of that ever expanding corpus/infrastructure. And so on and so
forth.

------
anuraaga
This is really helpful, thanks a lot! Just wondering, is the template released
as Creative Commons or anything similar? I'd like to use it in some teaching
material but only if it's intended use.

------
deanmoriarty
I know this article focuses on founders, but I'd love to see something done in
the industry for employees (especially early employees!) as well.

One of the former companies I worked at never allowed early exercise and
issued standard ISO with 90 day expiration upon leaving, which is
unfortunately essentially the analogue of "standard and clean" when it comes
to employee compensation. By the time I was ready to leave (4+ years, I was
very early) all my equity was vested, and buying it required spending ~250k
(USD!) between cost of exercising and AMT taxes, all while the company shares
were illiquid as ever. The company had no interest in helping me, despite me
asking for an extension to the option expiration, they were too bitter that I
was leaving and creating significant "damage" to the business.

It was incredibly painful and I felt very cheated and stupid for agreeing to
those terms in the first place (actually faced some deep depression and anger
against the world for a few months because of this, and thought about going to
therapy), but what did I do in the end? I paid out the money. Yes, I wrote a
check to my employer for 60k, and another check to the IRS for 190k, depleting
my non-emergency savings (and this is from a very frugal person, who never
even spent more than 8k on a car, car being my biggest expense ever). There
were funds who would lend me the money, but wanted 50%+ of the proceeds, and
if the company goes under you're still on the hook for a taxable event when
the loan is forgiven.

Luckily AMT for ISO exercise can be slowly (very slowly) recouped in future
tax years (and the new tax law made it a bit easier by increasing the
deduction and the phaseout limits), but I still had to waste so much of my
after tax money just to leave with what I matured over the years. And that
money is now sitting in the government pockets for years, producing me no
interest and losing value with inflation until I recoup all of it.

Fortunately, a year after I bought those shares one of the investors contacted
me and bought some of my equity, so I was able to recoup all what I originally
put in (and then some). But it's simply insane, and I am still in the hole for
all that AMT that I will recoup in ~10 years, no less.

Other coworkers who left and didn't have the money to come up with the
exercise and tax liability, simply lost them, justifying to themselves "well,
they're probably not going to be worth anything anyway" (which could be
totally true even after paying thousands to exercise them!).

It's a plain insult to startup employees. I wish all startup employees would
rebel against this and refused to accept any startup offer unless there was
early exercise paid by the company upon joining, or option expiration window
of 10+ years.

I, for one, know that will never __ever__ join another startup again for this
reason.

~~~
nlh
This sucks. Sorry to hear they did that to you and I’m glad you made out ahead
of the game.

A company I worked with had the opposite approach — they not only allowed for
early exercise, they allowed for immediate exercise of all unvested shares
with an 83(b) election (and converted the vesting schedule into a clawback
schedule). AND they offered a bonus for the amount of the exercise price.

So in effect, if you had $100k in stock vesting over 4 years, the company
would bonus you $100k, you’d then exercise, file an 83(b) election, and you
owned Common with a clawback provision.

You of course were liable for the income tax on the $100k, the company was
liable for the employer portion of same, and when/if the shares were sold
you’d be liable for capital gains accordingly, but overall this seemed like an
eminently fair offer to employees and cost the company only the employer
portion of the income tax on the bonus.

Everyone loved it and employees felt respected and treated fairly. Why don’t
more companies do this?

~~~
lostdog
What a great step in the right direction!

The $40k+ you could owe in taxes is still a problem. Perhaps the company could
give you an open-ended loan of the $100k (that you paid back if you returned
the stock, or after a good exit).

~~~
nlh
Agreed, but: I think that might cross the line into what a loan actually is
vs. what income actually is (or at least the IRS might have something to say
about it).

I know the $40k in taxes sucks, but if you step back and think about it, it's
actually quite "fair" (ignoring fundamental arguments about whether taxes are
fair heh ;).

You are receiving $100k in stock options/stock. That will grow over time. I
think it's fair to be taxed on that stock as income (since it is income!
you're being given an asset) and then, later, be taxed on the gain of of that
asset (if there is a gain). If you leave the company, they'll have the option
to buy back any clawed-back stock, so you could even end up ahead (let's say
you vest 50% then leave, so company pays you $50k for the unvested/clawed-back
stock -- then you're actually ahead of the game by $10k net of taxes).

------
olliepop
We're closing our seed round this week - this is such a good reference,
especially because I have a technical background.

Is anybody able to shed some light on the key differences between a seed term
sheet and this Series A term sheet?

------
mixmastamyk
Does anyone have a link to a great intro on VC for dummies? I keep seeing
these kind of posts but not the big picture in blog form. Maybe a thousand
words or two, not too detailed.

------
benmowa
Very useful, thanks! Is access to financial statements implied? what about
requiring audited financials? or is that not common/expense at that stage?

~~~
akharris
Those are diligence items that aren't typically defined in a term sheet.
You'll deal with that directly with the investor, potentially as a condition
to close as worked out in the full docs.

------
auvi
are there any good book with lots of examples of term sheet/valuation math for
startups?

~~~
patio11
Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, Brad Feld.

~~~
auvi
great, i’ll get the book. thanks!

------
naveenspark
Founders should invest time and effort to ask for more board seats. The YC doc
is a good start but if you follow this to the letter you may lose control in
your B or C when the B and C investor also want board seats. Also it’s
important to keep in mind that there is no “standard.” Everything is always
negotiable.

------
yayaa
Can someone please explain each clause in layman’s terms. Thanks.

Trying to learn the lingo of VC.

------
andys627
For real estate, your state’s realtor organization will have standard purchase
forms available with a quick google search. With these, a title insurance
company, and home inspector, you can easily do a private party real estate
deal where everybody has reasonable insurance.

------
mnemotronic
I'm a software guy. Most of that sheet is a foreign language to me.

~~~
robhunter
Are you starting a (venture-scale) company? Learning this language is
critical.

Are you working for a startup? Becoming more familiar with this language is
helpful - you can figure out whether the founders/executives know what they're
doing or not.

Are you working for a large company? Learning this language will not provide
much benefit for you IMO.

~~~
vxNsr
If the answer to either of the first two questions is yes, where would I go to
learn the jargon? (I do know about google, I'm just hoping there's a good
resource that has everything so I don't need to search individual terms).

~~~
matthewmcg
This book is pretty good and reasonably up to date:
[https://www.amazon.com/Entrepreneurs-Guide-Business-
Law-4th/...](https://www.amazon.com/Entrepreneurs-Guide-Business-
Law-4th/dp/0538466464/ref=sr_1_1?s=books&ie=UTF8&qid=1548709331&sr=1-1&keywords=dauchy+business+law)

We used an older edition as a textbook in a Venture Capital seminar back when
I was in law school.

~~~
vxNsr
Thank you!

------
taherchhabra
Is there any similar resource and guidance for seed/angel, thanks

------
wtvanhest
I thought the original SAFE was on casetext.com. Too bad this wasn't loaded
there as well.

------
entity345
How enforceable is that "No Shop" clause that is said to be binding in the
document?

~~~
jasonkwon
I'm going to answer this question a little differently, because enforceability
can also depend on facts and circumstances. Think of the binding / non-binding
distinction as more of a social commitment signal. The No Shop means that once
the company and investor both sign, they're pledging to work together to
figure out this deal along these high level terms for the next 30 days.
They've made a commitment to each other. Venture is a relatively small
community and going back on your word gets around. Social consequences can be
just as bad as legal ones.

~~~
entity345
Well yes... It is a promise.

Your reply suggests that it's not binding ('legally' binding, obviously).

~~~
jasonkwon
It can be legally binding.

~~~
entity345
Ok... So how would you enforce it? It does not seem to form a contract.

I realise that this is mostly US law and that my limited knowledge relates to
British law. So with that in mind, my understanding is that a simple promise
is basically not legally enforceable.

~~~
sethbannon
It can be enforced with a lawsuit like this, when an investor doesn't care as
much about their reputation with founders:
[https://www.bloomberg.com/news/articles/2018-04-25/crypto-
bi...](https://www.bloomberg.com/news/articles/2018-04-25/crypto-billionaire-
sued-by-sequoia-after-funding-deal-goes-awry)

~~~
entity345
I'm sorry but that does not answer my question at all.

It's quite obvious that a legal dispute may be settled in court. We do not
know the details of the case you quoted so it's difficult to comment.

I'm asking specifically about the template that is posted here because it
looks like a simple promise and, as mentioned, these have no value in many
jurisdictions. I suppose I'm asking how it works in Delaware, basically.

I suspect that the first reply I got is actually it...

~~~
hobbyjogger
> In many jurisdictions of the United States, promissory estoppel is an
> alternative to consideration as a basis for enforcing a promise. It is also
> sometimes called detrimental reliance.

Wiki:
[https://en.wikipedia.org/wiki/Estoppel#Promissory_estoppel_2](https://en.wikipedia.org/wiki/Estoppel#Promissory_estoppel_2)

PDF:
[https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?refe...](https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=11423&context=journal_articles)

~~~
entity345
Yes I know estoppel.

But in this case?

------
zxcvvcxz
Question: do investors usually vest at the same rate as founders, or at all?

E.g. if they put in 1M for 25%, do they legally receive the 25% of shares
right away?

What's typical here? In terms of investor vesting relative to the founders.

~~~
patio11
Investors don't vest and (to a first approximation) can't be fired. (They can
constructively "quit", by refusing to answer your emails, but they keep all
their equity and you keep all their money.)

The question of whether they "legally receive the shares right away" can be a
bit more nuanced, particularly in e.g. a transaction for a SAFE or convertible
note.

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