Last version published: 01/04/2020 15:23
Publication number: ELQ-95969-8
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Founder Friendly Term Sheets & Startup Contracts
Addendum for term sheets, employment agreements, bylaws, etc. with favorable terms for entrepreneurs.
Founder Friendly Standard is a framework for determining if your startup investment deal is founder friendly. It can help entrepreneurs avoid disputes around voting rights, founder vesting, non-compete, and other factors that cause startup relationships to implode.
The document has 17 total provisions across 5 sections. Here are some of the juiciest ones:
- Founders get super-voting equity (24:1 votes).
- Option pools dilute all equity holders equally. Thanks to Sam Altman from YCombinator (another Eloquens author, see "Founder-Friendly Term Sheet") for sparking this idea.
- Company won’t agree to pay investors’ legal fees on any investment deal closed within first two years of operations.
- Company won't agree to arbitration with any investor or founder in any agreement signed within first two years of operations.
- Non-compete provisions can only be in active employee and contractor agreements, never in organizational documents. If founders are fired, they need to find work in their industries and keep their equity.
Use the Founder Friendly Standard when incorporating your startup and when negotiating organizational documents such as term sheets, stock purchase agreements, private placement memorandums (PPMs), and stock option plans with co-founders, angel investors, and venture capitalists.
IMPORTANT: Always make sure you have an attorney perform this work. You can find an attorney familiar with the Founder Friendly Standard on our website.
UPDATE ON 10/8/19 – Added a Word file to this package containing comparisons of Founder Friendly Standard with these popular agreements: 500 Startups KISS, Y Combinator Safes, NVCA legal docs, Gust Series Seed, Sam Altman Term Sheet, and Y Combinator Series A.
* Founder Friendly Standard was first published on Eisaiah Engel’s blog in November of 2017. This is not legal advice.
This Best Practice includes
1 Downloadable Term Sheet in Word, PDF, and PowerPoint formats; 1 Attorney Adjudication Form
Eisaiah Engel offers you this Best Practice for free!
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Transform any term sheet template or startup legal agreement into one that meets the Founder Friendly Standard.
Bootstrapped/lean startups with revenue and a long-term vision. Make sure you have an attorney perform this work.
Startups without revenue that require large amounts of capital. Or, startups who try to use the Founder Friendly Standard without hiring an attorney.
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Discussion feed for Founder Friendly Term Sheets & Startup Contracts
The user community and author are here to help. Go ahead!
- What kind of legal documents are you evaluating against the Founder Friendly Standard? We have an effort underway to compare the NVCA templates, YCombinator Safe, Y Combinator Series A, KISS, Gust Series A, and Sam Altman's term sheet to it.arrow_drop_uparrow_drop_downReply reply
- The comparison research is done, and I've added a new .docx file to this package called "Founder Friendly Standard Comparisons" that shows how 500 Startups KISS, Y Combinator Safes, NVCA legal docs, Gust Series Seed, Sam Altman Term Sheet, and Y Combinator Series A docs compare.arrow_drop_uparrow_drop_downReply reply