What do definitive agreements for a Series A financing look like?
Takeaway: The "definitive agreements" are the full, legally binding contracts that put your term sheet into action; they are a standardized set of documents that formally define the rights, rules, and relationships between the company and its new investors.
After you sign a non-binding term sheet for your Series A financing, the real legal work begins. The high-level terms from the term sheet must now be translated into a set of comprehensive, legally binding contracts known as the "definitive agreements." While the term sheet was a 5-10 page blueprint, the definitive agreements will be a stack of documents running over a hundred pages.
This is the phase where the lawyers for both the company and the investors take over, drafting and negotiating the detailed language that will govern your company for years to come. While the process can be complex, the set of documents themselves is highly standardized across the venture capital industry.
The core definitive agreements for a Series A financing include:
The Amended and Restated Certificate of Incorporation: This is the foundational document that is filed with the State of Delaware. It officially creates the new class of Series A Preferred Stock and formally writes all of the special rights and privileges of that stock—such as the liquidation preference and anti-dilution rights—into the company's charter.
The Stock Purchase Agreement (SPA): This is the primary contract for the sale of the stock. It details who is buying how many shares and at what price. The SPA also contains the extensive representations and warranties that the company makes to the investors about its business and legal health.
The Investors' Rights Agreement (IRA): This agreement grants the investors a set of key rights related to information and future liquidity. This typically includes:
Information Rights: The right to receive regular financial statements and other information about the company.
Registration Rights: The right to have their shares registered with the SEC in a future IPO, allowing them to sell their stock on the public market.
A "Market Standoff" Provision: A promise from all stockholders not to sell their shares for a set period (typically 180 days) after an IPO.
A Right of First Offer (or "Pro Rata" right): The right for major investors to maintain their ownership percentage by participating in future financing rounds.
The Voting Agreement: This agreement sets the size and composition of the post-financing Board of Directors and contractually obligates all major stockholders to vote their shares to elect the designated board members.
The Right of First Refusal and Co-Sale Agreement (ROFR/Co-Sale): This agreement governs the transfer of stock by the founders and other common stockholders. It provides the company and the investors with a right of first refusal to purchase the shares, and a "co-sale" or "tag-along" right that allows investors to participate in a founder's sale of stock.
While the business deal is set in the term sheet, the hard work of a financing is in drafting and negotiating these detailed definitive agreements to ensure the rights and obligations of all parties are clearly and legally defined.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.