Practice Area
Fundraising & Capital Strategy
A Financing Transfers Rights, Often Both Economic and Governance
Valuation is just one of the terms a financing sets. Early investors buy the most economics for the least money and usually take little governance with it: a valuation cap or a discount, and often nothing more. Later-stage investors pay a greater price per share, but negotiate downside protection like anti-dilution provisions and liquidation preferences, and governance rights like board representation, voting, and information.
In return, founders get capital and, ideally, the judgment and network that come with it. We advise founders and companies in New York, Oklahoma, Texas, and Washington on raising capital, from early-stage instruments through priced rounds.
Early Stage Financings Defer the Price (But Take a Larger Slice)
Early stage financings often rely on simple agreements for future equity, or SAFEs, and convertible notes for convenience and cost efficiency. These are equity-linked financial instruments that let a company raise money without the documentation, negotiation, and valuation work a priced round requires. Neither is equity when signed; each is a right to receive equity later on terms fixed now, converting on a triggering event that is usually a priced round.
Neither sets a price for the company, though a valuation cap or a discount often reflects what an investor thinks it is worth. The number of shares the instrument converts into depends on that cap or discount and on how the conversion mechanics relate to other outstanding instruments.
We assist with:
- SAFEs and convertible notes
- seed rounds
- early investor negotiations
See also: Equity & Cap Tables
Priced Rounds Set the Price and the Rights
A priced round is a financing in which the parties agree on a valuation and the company issues shares of stock, typically preferred stock, at a set price per share. Outstanding SAFEs and convertible notes usually convert in the same transaction, which is when the ownership they represent becomes concrete.
A priced round is also a governance transaction. Preferred stock typically carries rights common stock does not, and those rights are most of what gets negotiated: liquidation preference, conversion and anti-dilution, protective provisions, board representation, and voting, information and participation rights. The documents are largely standardized, which narrows the negotiation to the terms that differ from deal to deal.
We assist with:
- term sheets and the preferred stock terms that follow from them
- charter amendments creating a new series, and the approvals they require
- liquidation preference, anti-dilution, and protective provisions
- investors' rights, voting, and right of first refusal and co-sale agreements
- how outstanding SAFEs and notes convert in the round
- timing and sequencing across rounds, and sizing one against a milestone
| SAFE | Convertible note | Priced round | |
|---|---|---|---|
| What it is | A simple agreement for future equity | Debt that converts to equity | Preferred stock sold at an agreed price |
| Sets a price per share | No; converts based on a valuation cap or discount to the next financing | No; priced on conversion | Yes |
| Interest | None | Typically accrues | None |
| Maturity date | None | Yes, which creates a deadline | Not applicable |
| If no priced round happens | Generally stays outstanding | Comes due unless extended or renegotiated | Not applicable |
| Priority in a wind-down | Behind debt, alongside preferred | A creditor claim, paid before equity | Liquidation preference ahead of common |
| Investor rights | Few in the instrument itself | Few in the instrument itself | Negotiated: board seats, protective provisions, information rights |
| Documentation | Lightest | Moderate | Heaviest |
See also: Board and Stockholder Governance