Recently Yokum Taku of WSGR announced, together with TheFunded.com and Founder Institute, a new set of standard forms for an investment security called “Convertible Equity.” The open sourced standard form documents can be found here: term sheet, purchase agreement and convertible security. The release received a fair amount of attention in Techcrunch, among other publications, and in my Twitter feed.
First, kudos to Yokum, TheFunded and Founder Institute for attempting to further the causes of document standardization, lowering friction in fundraising and achieving greater balance between the forms of investment known as convertible debt and equity. This is something that all of us in the startup ecosystem strive for, even, ahem, the lawyers.
Since then, many of us in the startup community have been asked by clients and others about this form of investment structure, and I thought I would make my thoughts known publicly.