Documents for seed investments
The BVCA model documents have been drafted for use on a Series A funding round. They envisage a significant investment being made in whole or in part by fund investors. In the view of the BVCA, the model documents are not appropriate for use in connection with a seed funding round. Such rounds are typically documented using shorter form documents which are either replaced or updated for a Series A round.
Many law firms, entrepreneur networks and other organisations offer template documents suitable for seed investing, which are available over the internet. The BVCA does not make a specific recommendation on which suite is most suitable, due to the wide variety available and the range of seed investing circumstances.
However, in choosing a suite for a seed funding round, the following factors should be borne in mind:
- Is the suite appropriately detailed for the specific circumstances (e.g. a £20,000 loan from one individual would need less detail than a £1,000,000 equity seed round with multiple investors including institutional VC funds).
- Where relevant in the light of the above, does the suite contain all the documents you will need such as:
- Term Sheet (high level summary of the agreed arrangements, not usually legally binding save as to certain provisions like confidentially and sometimes exclusivity)
- Confidentiality Agreement (to protect materials disclosed to investors to help them evaluate investment)
- Investment/Shareholders agreement(s)
- Articles of Association
- And do all of the above work together fluently?
- Is the suite written in plain English and as short-form as is compatible with the objectives of the documents?