Eliminating the “Man”: Launch of Series Seed Documents
By Taryn Cooper, at 2:03 pm on March 2nd, 2010The rejoicing you may be hearing today are entrepreneurs and potential start-up financiers cheering the launch of Series Seed Documents, a service to help new companies raise funds without tons of legal fees and documentation involved.
Spearheaded by VC stalwarts Andreessen Horowitz, First Round Capital, Charles River Ventures, and True Ventures, the idea is that being that it now costs less to build a tech product, first round funding is usually more prohibitive with legal fees going up but funding rounds not being as high (going from $5 mm to $20 mm for first rounds to as little as $500K to $1 mm to generate). According to Mark Andreessen, these documents are necessary for several reasons, as he explains below:
“What hasn’t changed is the process by which funding rounds get done. So what’s been happening is entrepreneurs have been finding that if they raise money from angels, that’s fine, but VCs will often try to use their full standard processes, even for small rounds. That can mean a lot of legal negotiations and legal fees, because [standard term sheets] are really complicated. Historically, that’s worked to VCs’ advantage, but it’s not good for entrepreneurs.”
First round funding can still be negotiated even using this documentation, however removal of the “middle man” (meaning: lawyers who are generally the few who profit from these negotiations) can be beneficial for the next Sergey Brin or Biz Stone who is looking to start their next big venture.
