Seed Financings: Pick a Template, Any Template

There are some thoughtful comments -- from lawyers! -- on Fred Wilson's post of yesterday on the various sets of seed funding documents now available on the Web. Fred lists four sets, and the comments identify others.

But my conviction after reading Fred's post and the comment stream is this: it almost doesn't matter what forms you start with. The point is for the entrepreneurs and investors to understand what the forms, whichever they choose, actually say.

Here's an excerpt from a comment by lawyer Brendan Davey:

"In practice, none of these [open source] forms are ever a satisfactory representation of intent of either side in a transaction, but are a good place to start. As Fred stated in [the] post, there are just some issues that an entrepreneur or VC, once they realize what they are giving up, will want to be handled differently."

That was followed by an equally good comment by another lawyer, Dan Lewis, who concluded:

"The goal is not to standardize, but to demystify and make non-scary/inexpensive for the entrepreneur. Standardization fails because it's lazy and, in the end, does not actually accomplish those goals."

Not sure I agree with Dan that standardization, as such, is bad, though I totally agree with his point that the documents must be understood.

On reflection, I wonder if we should think of "standardizing" as the goal of having very standard, boilerplate provisions that can work like modules. So that, for example, if you encounter something nutty in one of the sets of forms that addresses the vanity or political needs of the promulgator or sponsor of that set of forms, you can replace or repair that bit with a well-milled piece from a master set. In point of practice, there are such pieces floating around that lawyers recycle, but it would serve entrepreneurs and investors better if these were transparent. Such pieces would be further "standardized" when a plug-and-play tool would let you build documents from them (perhaps such a tool could be an extension of one of the term sheet generators).

Housekeeping: I stand down from my earlier declared ambition to mark up and simplify the NVCA form for purposes of a seed equity financing. I learned from Dave Broadwin's blog that Ted Wang will be making available "model seed series financing documents" (amazing what you can learn, not just from comments, but from following the links that Disqus supplies to the commentators!). I'll wait to see those Ted Wang templates, and hope to find they work well enough. Because the insight now to test is that any form is as good a place to start as any other. :/