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A priced equity round is a sale of preferred stock to investors at a set price per share, based on a valuation the company and its lead investor agree on. Most companies raise their first priced round as a Series Seed or Series A, often after SAFE or note rounds that convert when it closes.
We represent the company, negotiating the term sheet and definitive documents and explaining to the founders and board how each term affects control, dilution and the next raise. Our page on SAFEs and convertible notes covers the earlier rounds.
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Terms That Shape the Round
Valuation and Option Pool
The pre-money valuation, and how large an option pool investors want counted before their money comes in.
Liquidation Preference
What preferred holders receive in a sale or wind-down before common holders are paid.
Anti-Dilution Protection
How the preferred stock's conversion price adjusts if the company later sells shares for less.
Board and Protective Provisions
Who holds board seats, and which major actions need the preferred holders' approval.
The Financing Documents
Many venture rounds start from the National Venture Capital Association's model documents, or seed-stage versions built on them:
Amended and Restated Certificate of Incorporation
Creates the preferred stock and its preference, conversion, anti-dilution and voting rights.
Stock Purchase Agreement
The investment itself, the company's representations and the closing conditions.
Investors' Rights Agreement
Information rights, registration rights and the right to buy into future rounds.
Voting Agreement
How the stockholders elect the board.
Right of First Refusal and Co-sale Agreement
Limits on founders selling their own shares.
Economics and Control
The option pool can matter as much as the valuation. Investors often ask the company to create or enlarge the pool as part of the pre-money valuation, which puts that dilution on existing holders, so we size it to a realistic hiring plan. Most rounds use broad-based weighted average anti-dilution protection. A full ratchet, which reprices the preferred stock to any lower later price, is uncommon and costly for founders. Early boards often seat founders and an investor designee, and the board decides who runs the company and whether to sell it.
Diligence and Closing
We review the company's records before investors' counsel does and fix what we can, sometimes through board ratification. Closing usually includes the filed charter, board and stockholder consents, an officer's certificate, good standing certificates and the conversion of SAFEs and notes. The company then makes its securities filings.
How a Priced Round Closes
Term Sheet
We negotiate the economic and control terms with the lead investor.
Investor Diligence
Investors' counsel reviews the charter, consents, cap table, IP assignments and contracts.
Definitive Documents
The charter, stock purchase agreement and investor agreements are negotiated, often starting from NVCA forms.
Board and Stockholder Approvals
The board and stockholders approve the round, and the amended charter is filed.
Closing the Round
Investors wire funds, SAFEs and notes convert, and the company issues the preferred stock.
After Closing
Securities filings, an updated cap table and the first board meeting under the new terms.
Frequently Asked Questions
Have a question that isn't answered here? Call us at (817) 631-8842 or send a message.
Ask a QuestionWhat is a liquidation preference?
It decides who is paid first, and how much, when the company is sold or wound down. The preference amount is usually stated as a multiple of what the preferred holders paid. With a non-participating preference, they receive the greater of that amount or what they would get as common stock, while a participating preference pays that amount and then shares in the rest.
Does our company have to be a Delaware corporation to raise venture capital?
No law requires it, but many venture investors expect one, and the NVCA forms are written around Delaware corporate law. A Texas LLC or corporation can convert before the round, and we plan the tax side with the company's CPA. See our page on entity conversions.
Is a venture capital term sheet binding?
Mostly not. The economic and control terms are usually non-binding, while confidentiality and exclusivity provisions usually are binding. Exclusivity keeps the company from talking with other investors for a set period, so its length is worth negotiating.
What are protective provisions?
They are the preferred holders' veto rights over listed actions, such as selling the company, issuing senior stock or changing the preferred stock's rights. A standard set is expected. Broader vetoes over budgets, hiring or ordinary contracts give a minority investor control of day-to-day operations and are worth pushing back on.
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