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Insights
Letters of Intent (LOIs): What Founders Need to Know Before the Deal
Startups often move fast - but when you're courting investors, buyers, or major customers, you need to slow down just long enough to sign a Letter of Intent (LOI). It’s not a binding contract (usually), but it lays the groundwork for one - and sets the tone for the entire deal.
SaaS Agreements Demystified: Legal Must-Knows for Software Startups
If your startup delivers software in the cloud, your SaaS Agreement isn’t just legal fine print - it’s the foundation of your customer relationships. The terms you set now will define your revenue model, limit your risks, and help you scale into larger deals.
Licensing Agreements for Startups: Turning Your IP into Revenue
Licensing your intellectual property - whether it’s code, brand, or content - can be a smart way to scale without manufacturing or selling yourself. But founders need to tread carefully: Licensing Agreements involve handing over rights to your most valuable asset.
Expanding Your Reach: What Startup Founders Should Know About Distribution Agreements
If your startup sells physical products or software, you may eventually need help reaching customers in new markets. A distribution agreement can be a powerful way to expand without building a large internal sales team.
FAQs
Open allWhy do some investors require a Management Rights Letter?
Because funds with ERISA or pension fund LPs must show they are “managing” investments to avoid regulatory restrictions.
Can bylaws alone provide indemnification?
Bylaws may provide some protection, but stand-alone indemnification agreements are stronger and more enforceable, offering tailored protection for each director or officer.
How does indemnification relate to D&O insurance?
The indemnification agreement provides contractual protection, while D&O insurance provides financial backing. Together, they form a two-layer shield.
Does indemnification cover all types of claims?
No. It usually excludes fraud, bad faith, or gross negligence. Coverage applies only when actions are taken in good faith within the scope of duties.
Who typically receives indemnification agreements?
Founders, directors, executive officers, and sometimes key advisors.
Are ROFR and co-sale rights actually used in practice?
Yes, but selectively. While ROFR and co-sale rights are often more about governance than daily use, they remain an important safety net for investors.
Can founders negotiate exceptions to ROFR/Co-Sale?
Yes. Founders often negotiate carve-outs for estate planning transfers, gifts, or small private sales.
What’s the difference between ROFR and co-sale rights?
ROFR gives the company or investors the right to buy shares before outsiders. Co-sale rights let investors “tag along” and sell their shares alongside a selling shareholder.
Can Voting Agreements change over time?
Yes. They can include sunset provisions or be amended in later financing rounds to reflect shifts in ownership or company maturity.
Do founders always lose board control under a Voting Agreement?
Not always. Negotiated terms often leave founders with meaningful board representation, though investors usually gain at least one seat and sometimes an independent director.
How does the Voting Agreement interact with other financing documents?
It works alongside the Investor Rights Agreement, ROFR and Co-Sale Agreement, and SPA to create a complete governance framework.
Who typically signs the Voting Agreement?
Founders, major investors, and sometimes key employees sign the Voting Agreement as part of a priced equity round.
Can founders negotiate limits on investor rights?
Yes. Founders can negotiate reporting frequency, pro rata thresholds, and board seat limits to ensure rights are appropriate for the company’s stage.
When do registration rights become relevant?
Registration rights only come into play if the company goes public. They give investors the right to sell their shares in the IPO or subsequent offerings.
What is the difference between the IRA and the Stock Purchase Agreement?
The SPA governs the actual purchase of shares, while the IRA governs post-investment rights like information access, pro rata participation, and registration rights.