Resources for insight and
inspiration
Guides
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 allDo all investors get rights under the IRA?
Not usually. Most rights are limited to “major investors” who meet certain thresholds, preventing administrative complexity from smaller shareholders.
Can the SPA include multiple closings?
Yes. Some SPAs allow staged investments or additional closings if investors commit to fund in tranches.
What happens if reps and warranties in the SPA are inaccurate?
If misstatements are discovered, investors may have indemnification claims, meaning the company (or founders in some cases) could be liable.
Do all investors sign the SPA?
Yes, all participating investors sign the SPA, along with the company. It governs the purchase of shares in that financing round.
How is an SPA different from a term sheet?
The term sheet is a non-binding summary of key deal points. The SPA is the binding agreement that formalizes the transaction and contains detailed legal terms.
What is a typical range for valuation caps?
Seed-stage caps often fall between $3M and $10M, but terms vary widely depending on market conditions, industry, and company traction.
How do valuation caps affect dilution?
Low caps can create significant dilution when notes or SAFEs convert, especially if the company grows rapidly before a priced round.
Are valuation caps always included in SAFEs and notes?
Not always, but they are common. Some early-stage investors accept uncapped SAFEs if they have strong conviction in the company.
What is the difference between a valuation cap and a discount?
A cap sets the maximum valuation for conversion, while a discount lowers the share price relative to the next round’s investors. Many instruments include both, and investors convert using whichever is more favorable.
How long do companies or investors have to exercise a ROFR?
Typically 30–60 days, though shorter timelines may be negotiated to avoid deal delays.
What is the difference between ROFR and ROFO?
A ROFR (Right of First Refusal) allows the company or investors to match a third-party offer. A ROFO (Right of First Offer) requires the shareholder to offer their shares internally before seeking outside buyers.
Can drag-along rights be negotiated?
Yes. Founders often negotiate for higher approval thresholds, equal treatment provisions, and liability caps to ensure fairness.
What is a typical threshold to trigger drag-along rights?
Most agreements require majority or supermajority consent (often 60 - 70%) from preferred shareholders, though this can vary by deal.