Apicus · chapter no. 06
The document library. Every raise is a paper trail. Here is all of it.
The SAFE gets the headlines, but a fundable company is built on a stack of documents that starts the day you incorporate. Nearly all of them have free, open-source, industry-standard versions, and the filings go straight to the state, the IRS, and the SEC. Use the standards verbatim: every creative deviation costs lawyer hours on both sides and signals inexperience to investors.
No. 01 · Before any money
The formation stack
Investors diligence these before they wire a dollar. Get them right at incorporation and they never come up again; get them wrong and they become the reason a round stalls. Every one is either a filing you submit directly to the government or a short standard agreement you sign internally. No service required.
Certificate of Incorporation
The company's birth certificate, filed directly with the state. Investors expect a Delaware C-corp; most standard financing documents assume it. File it yourself at the Delaware Division of Corporations ↗.
Bylaws
The internal operating rules: board mechanics, officers, meetings, stock transfers. Standard forms exist; almost nobody negotiates them.
Founder Stock Purchase Agreements
Founders buy their shares early and cheap, with vesting (typically 4 years, 1-year cliff). Vesting protects the company and the other founders if someone walks.
83(b) Election
A one-page filing mailed straight to the IRS, postmarked within 30 days of a restricted stock purchase. Miss it and vesting becomes a recurring tax bill. The IRS publishes a standardized election, Form 15620 ↗; file it online through an IRS Online Account or send it certified mail and keep the receipt.
Invention Assignment (CIIA / PIIA)
Assigns founder and employee IP to the company. Every investor's diligence checklist asks whether all past and present contributors have signed one.
Equity Incentive Plan
The option pool and its rulebook, adopted by the board. Needed before your first employee grant; sized and re-sized at every priced round. Before that first grant, get a 409A valuation: the independent appraisal that sets the option strike price, refreshed every 12 months or at material events. Employee options are usually ISOs, advisor and contractor options NSOs; the tax treatment differs.
No. 02 · First money in
Early-stage instruments, compared
The SAFE won the standards war, but it isn't the only instrument you'll meet. Some investors still prefer convertible notes; a few use 500 Global's KISS forms. Know the differences before someone else's counsel picks for you.
| Instrument | Interest | Maturity date | Key terms | Reach for it when |
|---|---|---|---|---|
| Post-money SAFE | none | none | Cap, discount, or MFN (most favored nation: the holder inherits any better later terms) | Default choice: fastest, cheapest, best understood |
| Pre-money SAFE (legacy) | none | none | Pre-money cap: ownership unknowable until the round prices | You don't. It's the retired 2013 original; know it only to read older cap tables |
| Convertible note | 2–8% | 12–24 months | Cap + discount, repayable at maturity | The investor wants debt protections or a forcing date |
| KISS (debt / equity) | ~5% / none | 18 months / none | Cap + discount, MFN, major-investor rights; auto-converts at a $1M+ qualified round | An investor insists on 500 Global's forms |
| Promissory note | Market rate | Fixed | No conversion: it's just a loan | Family money that should stay a loan, not equity |
A note's maturity date is a live grenade: if you haven't raised by then, the investor can technically demand repayment. Most extend; some don't. The SAFE removed that failure mode, which is why it won.
YC Post-money SAFE
All three official variants, the pro rata side letter, and the user guide, covered in depth in chapter 01 ↗ and downloadable at ycombinator.com/documents ↗. YC also publishes adapted versions for companies incorporated in Canada, the Cayman Islands, and Singapore.
Convertible note (Series Seed)
The open-source Series Seed project (created by attorney Ted Wang in 2010) includes a standard convertible note package with term sheet, released into the public domain on GitHub ↗.
KISS documents (500 Global)
Debt and equity flavors of 500's open-source instrument. The documents themselves are freely available; read both flavors before an investor hands you one filled in.
No. 03 · When the round gets priced
The NVCA priced-round stack
A Series A (and any priced equity round) runs on six documents. The National Venture Capital Association publishes model versions of all of them, free at nvca.org/model-legal-documents ↗. Your counsel starts from these; so does theirs.
- 01
Term Sheet
The non-binding summary of the whole deal: valuation, preferences, board, option pool. Negotiate hard here; everything after is drafting. YC publishes an annotated founder-friendly version at ycombinator.com ↗.
- 02
Stock Purchase Agreement (SPA)
The actual sale: who buys how many shares at what price, plus your representations and warranties about the company. The disclosure schedule attached to it is where you list every exception, honestly.
- 03
Amended & Restated Certificate of Incorporation
The charter, refiled to create the new preferred stock: its liquidation preference, conversion rights, anti-dilution protection, and protective provisions. This is where preference multiples hide. Anti-dilution itself comes in two flavors: broad-based weighted average (standard, mild) and full ratchet (a down round reprices every preferred share to the new price; fight it).
- 04
Investors' Rights Agreement (IRA)
Information rights, registration rights, and pro rata rights for the new investors. The reporting obligations you agree to here are the ones you'll live with every quarter.
- 05
Voting Agreement
Board composition and how shareholders must vote on it, plus drag-along rights that let a defined majority (typically preferred plus the board plus a common majority) force a sale through. Board control is decided here, not in the term sheet.
- 06
Right of First Refusal & Co-Sale Agreement
Controls what happens when a founder wants to sell shares: the company and investors get first claim and investors can sell alongside. Standard, but read the transfer restrictions.
Raising a smaller priced round? Ted Wang's open-source Series Seed documents compress the NVCA stack into a lighter set built for seed-sized equity rounds. The full set lives on GitHub under a public-domain license.
No. 04 · The round around the round
Mechanics, consents & compliance
The instrument is one signature among many. Every financing drags a tail of approvals and filings; two of them have government deadlines.
Board & stockholder consents
Written approvals authorizing the financing, the new shares, and any charter amendment. Your counsel drafts them; your job is keeping the signer list current.
SEC Form D
The federal notice for a Reg D exempt raise, due within 15 days of the first sale. You file it yourself, directly with the SEC through EDGAR, free: the SEC's own filing guide ↗ walks through it. State "blue sky" notices often follow, filed per investor state with their own small fees and deadlines.
Accredited investor questionnaire
A short form each investor completes so you can rely on the Reg D exemption. Collect it before the wire, not after. Accredited generally means $200k income ($300k joint) in each of the last two years, or $1M net worth excluding the primary residence.
Side letters
Per-investor extras: pro rata rights, information rights, MFN clauses. Each one is a small promise that compounds across rounds, so keep a register of every letter you've signed.
Indemnification agreements & the management rights letter
Each director signs an indemnification agreement (the company's personal promise to cover them; D&O insurance is the policy that funds it) and ERISA-regulated funds will ask for a management rights letter. Model versions ship with the NVCA set.
Cap table
Not legally a document, practically the most important one. Keep a current, versioned ledger of every share, SAFE, option, and warrant from the first check. Every future round reconciles against it and the reconciling is your job.
The data room
Diligence-ready copies of everything on this page plus financials, contracts, and IP filings. Chapter 05's financial hygiene pillar ↗ covers keeping it always ready.
No. 05 · People & IP
The agreements around your team
Diligence always asks the same question: does the company actually own its product and is the team actually bound to it? These four answer it.
Offer letter + PIIA
Every employee signs both: the offer (at-will, equity subject to board approval) and the proprietary information and invention assignment. No exceptions, including and especially the founders' friends.
Advisor agreement (FAST)
The Founder Institute's standard advisor template: 0.15–1.0% equity by stage and level, vesting, defined expectations. Free at fi.co/fast ↗. Never grant advisor equity on a handshake.
Contractor agreement with IP assignment
Contractors own their work by default under copyright law. Without an explicit assignment clause, that landing page or codebase may not be yours to sell.
Mutual NDA
Useful with corporates, partners, and vendors. A standard mutual NDA is two pages; what matters is the scope of "confidential" and the term. One norm to know: venture investors do not sign NDAs to hear a pitch and asking marks you as new.
No. 06 · Cross-reference
The paperwork for every funding path
Chapter 01's ten funding sources, mapped to the documents each one will put in front of you.
| Funding path | Core documents | Watch for |
|---|---|---|
| Bootstrapping | Customer contracts: MSA, order forms, terms of service | Revenue is your instrument; make the contracts assignable for a future sale |
| Friends & Family | SAFE or promissory note, one-page investment memo | Paper it even when they insist you don't need to |
| Angels & Syndicates | SAFE, pro rata side letter, accredited investor questionnaire | Track every side letter; MFN clauses stack |
| Venture Capital | Term sheet, then the six-document NVCA stack, Form D | Preferences and board control live in the charter and voting agreement |
| Strategic & Corporate | Standard equity docs plus separate commercial, pilot, or license agreements | Keep investment and commercial terms in different documents you can renegotiate independently |
| Accelerators | Program agreement + the program's SAFEs (YC: $125k SAFE + $375k MFN SAFE) | Read the follow-on and pro rata terms before demo day, not after |
| Crowdfunding | SEC Form C, platform agreement, Crowd SAFE or SPV docs | Form C means public financials and annual reports; budget for compliance |
| Grants | Application (federal: SF-424 family), award agreement, progress reports | The award agreement scopes what the money may fund; pivots need approval |
| Loans & Venture Debt | Loan agreement, promissory note, security agreement, personal guarantee, warrant | Covenants (minimum-cash floors, MAC clauses) and the amortization start date matter more than the rate; the warrant is a small equity kicker sized off the loan |
| Revenue-Based Financing | Revenue purchase agreement, ACH authorization | Compute the effective APR yourself before signing; the fee is not the rate |
Templates draft; lawyers review. Every document on this page has a free standard version and you should still have startup counsel review what you sign. An hour of review on standard docs is cheap. Unwinding a bespoke document three years later is not.
Build for scale before you scale
Investors fund machines, not survival. The pillars, the metrics, and the readiness check.
The SAFE, in depth
The three YC variants, conversion examples, and the post-money math that dilutes founders, not investors.