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!
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.
Open standards are a starting point.
What's that like? Are you competing with other investors? Or do founders agree to forgo funding because they don't like anything on offer?
Looking forward to seeing some (more) term sheets from you!
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.
Edit: just saw it's in the article
> The way in which founders most often lose control at the Series A is with a 2-2-1 board structure, i.e. 2 founders, 2 investors and an independent board member. The loss of board control is most significant because it means the founders can be fired from their own company.
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?
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.
Any thoughts on this?
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.
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.
If my company is going to pay your legal fees, then they work for me, not you and I will reserve the right to fire them and find someone really cheap instead.
This the most logical comment on this thread. I can't believe people accept paying a VC's legal bills during a negotiation. VC's are in the business of doing deals, and have their own legal retainers to work on those deals - not to mention a fan favorite movie "My Cousin Vinny" teaches every American that giving $1 to a lawyer creates client-attorney privilege.
It's amazing that without being sued (and then losing on appeal in court), people are willing to pay out of pocket for a lawyer to actively work against them in what could be one of the most important deals of a founder's life.
Yes, but in this case, you aren't paying the lawyers, you're paying the bills that the lawyer is charging their clients, the VC. Essentially, it's a reimbursement where you are paying for the VC's A/C privilege.
Surely early investors will be diluted, so what are these peculiar rights referring to?
The anti-dilution adjustment is generally not something that applies to ordinary course dilution (like employee option grants).
Especially if the intent is to help unfamiliar founders & angels understand what's a "clean" or fair deal, I'd put in a vote that a v2 of this term sheet would clarify the applicability of rights to smaller investors, maybe with some "batteries included" guidance on that point.
The veto on company sales breaks founder friendly occasionally (you need a decent amount of leverage). Some examples:
1. It doesn’t exist
2. It only applies to sales that return less than X multiple of investor’s capital invested
3. It only applies to sales where the founders are getting retention packages (from acquirer) that substantially exceed their recent compensation
The veto on financings is present almost always. A founder would need rare leverage to get rid of it.
On both of these vetoes though there are additional constraints on abusive usage by investors — reputation being the most obvious one.
Are there any examples of these for the curious to read? I know it’s out of scope for the post topic but as someone who hasn’t read a term sheet before and is curious, I am also curious about reading a full series A sale contract.
It is typical that the term sheet results in ~5 different contracts: the Stock Purchase Agreement (through which the company actually sells stock), the Investor Rights Agreement, the Voting Agreement, the First Refusal and Co-Sale Agreement, and changes to the company's Certificate of Incorporation.
There are also sometimes opinions of counsel and other "ancillary" documents which are just as important but not typically negotiated as they're very standard.
It is mind-bogglingly routine that a company pays $30k to "expand" from the term sheet to definitive contracts, and then the VC firm spends an additional $15-30k++ (reimbursed by the company) to review that expansion to make sure the other firm did it right.
Every major law firm has extensive experience in it.
Every major investor's law firm has extensive experience in it.
It doesn't use juries, it uses judges. Cases can move very quickly. The Chancery is well-funded, and the judges have deep experience in corporate law.
- what is written as law
- how courts rule
The most important aspect is "how courts rule". This is because law is open to interpretation by those ruling on it.
The main upside of using judges instead of juries is that precedent is real. In a jury trial, you are relying on a random group of people to choose the outcome. In a trial ruled by a judge, you can reasonably expect that judge to rule in a similar fashion as they have on similar cases or based on precedent of previous cases.
Having a more predictable outcome that eliminates the "wild card" aspect of juries allows your representation to give you better legal advice as they can study how the courts have ruled in the past and give advice that will likely put you on the correct side of the law.
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.
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.
Something we did in our later financings was to (very politely) provide an interested investor with a fairly comprehensive (~7 pages) template term sheet that had blanks for the major economic terms, but otherwise fully specified all the details of the proposed deal. This kept things from drifting off "founder friendly" after signing and had the added bonus of making offers easier to compare.
Why is the no-shop provision standard, especially given that this document says it's the only binding term? What's going on here? I'd like to understand it a bit more.
Cool note, Google Drive provides an embed code for PDFs which I've found to be useful.
Filestack also provides a great API for viewing PDFs in apps/browsers that I use all the time.
* 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?
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.
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.
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?
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.).
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?
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.
* If this term sheet is used, can we avoid the legal costs of a Series A?
Most of the legal costs don’t arise from the term sheet. They come from legal diligence and drafting the definitive docs.
We got very lucky that things didn't work out with them
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.
1) This is a standard series A term sheet
2) This is a 1x non-participating liquidation preference.
Plenty of folks sign term sheets with MUCH WORSE preferences. Participating 1.5x etc.
This preference simply says, investor gets their money back if invested on a preferred basis during Series A.
That's where the real problems often come, participating preferred at 1x+. This is not one of those term sheets.
3) Fair is what is available in the market that is not misleading. A 1x nonparticipating preference is much more logical than many other approaches, so is easier to understand. And yes, if you take 20M from a Series A funder and sell for $22M, you are basically going to get $0.
I'm not saying this flippantly. I've negotiated many contracts over the decades and I've heard "this is standard" dozens of times, but it's always negotiable.
Note, I'm not saying the agreement presented is fair or not. That's situational. Just that "it's standard" is irrelevant.
That said, also illogical, why are these investors doing a preferred investment vs common if they don't have a preference?
The only people I've run into who can negotiate nonsense contracts are folks playing with other folks money (family etc). I will say I stay far away from those types of folks. Often crazy, and often have enough money to pursue their flights of fancy, including ungrounded legal theories, a good long distance.
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.
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.
This term sheet is nonparticipating 1x. Despite the first comment in this chain, this is actually a very reasonable approach, and preferred stockholder is always going to have a preference - or there would be no point in being preferred.
For example, if the founders take $1M in funding on a $2M post-money valuation, then end up losing $1M to excessive payroll costs to insiders and sell the remnants of the company for the pre-money valuation, the investors are out half their money without a liquidation preference. In short, the liquidation preference means that any losses come out of founder equity first, rather than the new cash infused in the business. This is important because the founders control the company and can choose to take courses of action that impoverish the company at their personal benefit.
I think YC should take the lead in trying to strip liquidity preferences from the industry. They should become non-standard in most term sheets. Ideally they advocate up the chain further by leveraging their considerable influence to water down or eliminate liquidity preference whenever possible. YC has been a founder-friendly venture firm from the beginning, I believe one of the best pro-founder fights for them to pick is to work toward ending the standardization of liquidity preferences. It's currently backwards, liquidity preferences should be rare.
The question I have is when the founders have acted in good faith and the company goes downhill, should the founders bear all the downside risk there?
I can see someone saying yes - if the company goes south, everyone should get the money they invested as shareholders back. But that's a different argument.
An additional question I'd ask - is some method of waiving liquidation preferences by the board (again, including the investor board member) a good idea from the perspective of aligning incentives?
Let's say the company has seen a downturn where there are two options at play: a sale at a value that would give the founders nothing, after the liquidation preference is exercised OR a risky (but legally defensible) Hail Mary business plan to bring the company back from the brink.
If the founders get nothing out of the sale, aren't they incentivized to choose the Hail Mary option? (Obviously there are other opportunity costs for the founders.) If the liquidation preference could be waived by the board, then that would give the founders an incentive to approve an "efficient" sale.
Note: I am suggesting the idea of the board approving the waiver, as opposed to the preferred shareholders, so that the waiver applied across the board to all preferred shareholders. And the investor board member would have to vote in the best interests of the company when voting in the role as a board member, as opposed to in their own self interest, which they do as a preferred shareholder.
All that being said, I don't think liquidation preferences are the place to focus on making "standard" term sheets more company friendly. I could write a lot about that...
This term sheet is a fair distillation of fairly standard terms. I think what adventured is looking for is something that moves the Overton Window as to what's "standard." I don't think YC was purporting to play that role here.
With organizations like the NVCA playing such a pivotal role in the terms of VC financings, I think it is critically important that thought be given on the founder side towards advocating more founder-friendly "standards."
My sense is that investors take a risk and that preferred protects them from a lot of downside of that risk. If they didn't have that protection, they'd need to do way way more work to protect against the risk, making it harder for startups to get/close their funding rounds.
Also, since investors price the risk in, you'd end up having to give investors more upside in the success case, which is a thing I'd personally prefer not to do.
What do you think are the upsides of investors having common stock only?
Right, I understand the outcome, but why do we want to do that.? What problem is solved by this? I'm trying to extract the benefits so that we can weigh them against the downsides.
Removing preference may seem like it more strongly aligns existing team during critical events... But that'd get priced in to the above, say by 80% based on today's preferred vs common. Ouch!
Todays push to 1x participating vs higher in older days is great. I do agree about misalignment during some critical events..
Hypothetically, each investor has some internal valuation for your startup, and is willing to take <x> risk. Giving those investors preferred shares reduces that risk, which means you can theoretically get more money while giving up less of the company. Obviously you trade that for the downsides of having preferred shareholders, but that's a choice for the founders.
Overwhelmingly the VCs are not your pals. They are there to make money, you should deal with them accordingly. In the best case scenario they're business partners, that's it. They don't feel bad about liquidity preferences and how that benefits them. Founders should never feel bad about fighting for the best terms they can get, the VCs will do exactly the same thing when they can - it's a core part of their job.
I would take the premise a step further actually. Potential early employees should always avoid joining start-ups that have liquidity preferences that could meaningfully negatively impact their own outcome (the worse the potential impact, the greater the aversion should be). When the liquidity preference hatchet comes down, the non-founder employees typically get smashed particularly hard.
Another great way to kill off liquidity preferences, is to create a competitive incentive related to employees and starve liquidity preference start-ups of talent. Start-ups should begin touting the lack of onerous liquidity preferences as a notable recruiting point re compensation packages.
... You'd have to support that argument, because it is not evident.
This is a mutual agreement between two informed parties. You don't have to take those terms, and you are free to offer them more common stock as a risk substitute. I also don't understand why you invoked class warfare here, which really undermines any credibility to your argument.
YC has put so much effort into founder education over the years precisely because that frequently has tended to not be the case. Quite the opposite.
I'm not sure what you're defining as informed here (mutually responsible for understanding what is being signed, sure), however I would point to knowledgeable as the more important term. The problem continues to frequently be that founders and early employees are nowhere near as mutually knowledgeable as their counterpoints in the VC world, who are elite professionals at these deals and do them for a living.
There's a great statement above by @mnemotronic that summarizes the routine imbalance between the two sides: "I'm a software guy. Most of that sheet is a foreign language to me."
I can sympathize, I've been dealing with VCs since the late 1990s and the terms/legal side is still an immense chore.
> I also don't understand why you invoked class warfare here, which really undermines any credibility to your argument.
No it doesn't, because it's not invoking class warfare, it's making a point about the typically dramatic financial condition and personal risk imbalance between the two sides (the personal damage absorbed if things go south). Founders and early employees can easily see their lives ruined if a venture fails, it's a not uncommon outcome, HN sees such stories posted regularly.
The comment that this is a way of reducing investor risk and may yield a higher valuation is well-taken. But founders should not agree to it, because their risk is far, far, far higher than that of the investors.
A founder gets one shot, or maybe two or three shots, in their lifetime. An investor gets many shots across a diversified portfolio. A founder puts their career and their financial future across in this one basket. They put their sanity and their personal happiness in this basket. An investor puts nothing but a small portion of their, or more frequently other people's, wealth in this basket.
Making it less likely that a founder will get a payoff is just stupid. A founder should do everything they can to reduce their risk, even at the cost of a lower valuation.
It'll likely take 7+ years from a Series A to an exit, if a founder leaves straight after funding and keeps all their equity, that's hugely demoralizing to the rest of the founders. They'll have to do the work to generate the value of the business over the next decade and end up with exactly the same rewards as the founder who left. It's the kind of thing that kills businesses.
From an investor perspective, an investor is unlikely to want to invest if the founders aren't committing to stick with the business.
The rank and file get a standard 4-year, monthly vest, 1 year cliff. The founders presumably get something very different. Existing employees are an unknown.
(I just read the inline version, not the downloadable Word version.)
Yes employees suffer along with the founders when bad preferences are chosen. But that's still the founders fault, not the investor.
My obvious point is that founders and employees should conspire whenever possible - acting in their shared interest - to eliminate investor-favorable liquidity preferences as a common part of start-up term sheets.
Company: [_______], A Delaware Corporation.
This isn't true for certain international jurisdictions, but within the US, it is a near certainty.
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.
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.
Fortunately, the fix is very simple: companies should just offer 10 year exercise windows. That prevents this scenario from happening to employees. We've written about this a bunch of times: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens... https://blog.samaltman.com/employee-equity https://triplebyte.com/blog/fixing-the-inequity-of-startup-e...
We hope that 10 year exercise windows will become the industry standard so that no one needs to worry about this anymore. Unfortunately, that hasn't happened yet. In the meantime, you can see a list of companies that have committed to them here: https://github.com/holman/extended-exercise-windows.
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?
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).
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).
however, be aware that you can negotiate for early exercise or 10 year expiration prior to joining. even if the startup has never done anything like that prior, they will make it happen if they really want to hire you.
In my experience, unless you are really an insanely high quality and senior hire, for a standard software engineer they're not going to do anything like that, since they have other candidates at the door who won't mention the equity pieces, you can't fight the system too easily.
I've personally been in an interview feedback loop, back when I was at a startup, where one of the founders (who was an interviewer) said: "This guy is technically really good, but asked too much about the details of the equity compensation, I think he might not be focused enough on our mission, let's pass".
When your startup is at series E and your options on paper are valued 7 figures and all the investment rounds were raised with clean terms (see linked post), I find it debatable to still hold on to the assumption that they should be valued at $0, like they were at Seed/Series A when you joined, and so be willing to walk away from them rather than dealing with painful vesting/exercising conditions that were initially set in your contact, no?
When you play the lottery, you expect $0 back, but you also expect that in the rare case you win you won't have to pay taxes on your win years before being able to get the prize, otherwise you just wouldn't play at all.
I agree it would be beneficial if the "Standard and Clean Series A Term Sheet" was employee-friendly as well.
Is anybody able to shed some light on the key differences between a seed term sheet and this Series A term sheet?
Trying to learn the lingo of VC.
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.
We used an older edition as a textbook in a Venture Capital seminar back when I was in law school.
Your reply suggests that it's not binding ('legally' binding, obviously).
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.
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...
But in this case?
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.
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.