500 Startups KISS
Earlier this month 500 startups released a set of documents designed to make convertible debt financing easier for startups. They call the document se KISS, Keep It Simple Security, and they realize just how unsexy it really is. Of course 500 startups is known for doing both the sexy and unsexy.
Originally released on July 3rd in the thick of the World Cup, they noted that these documents will only apply to a certain set of startups, but for those startups, they could be extremely important.
Convertible debt financing, or convertible notes have become one of the most popular and easiest ways t structure seed financings.
“Because convertible notes are generally simpler and less expensive than doing a more formal priced round, many founders and investors use them to “bridge” a company until it gets to larger, more traditional financing.” 500 Startups Gregory Raiten wrote in a blog post.
A quick Google of convertible notes will reveal hundreds of references to hundreds of boiler plate documents. What you get with the KISS set of documents from 500 startups, are well researched, and heavily used versions of the convertible note.
“They are designed to be flexible without being overly customizable, simple while still including all of the necessary features, and balanced from both a company and investor standpoint. We have provided two flavors of KISS to address the most common convertible financing structures we see today, along with a summary of the key terms ” They said.
The documents are available using Clerky. Clerky is an automated legal platform somewhat similar to Legal Zoom which is designed for startups. Coincidentally it was incubated at Y-Combnator and not 500. Nevertheless the documents are available via Clerky and members of the 500 family are even able to access them free. Others just pay a nominal fee but know they’re getting good stuff.
“over the course of the last 4 years, we have seen hundreds (if not thousands) of permutations on the “standard” convertible note.Each has its merits, and the YC SAFE docs in particular were a big step forward in creating a true industry standard (we have used them on several occasions since we are a frequent investor in YC companies). Still, we have yet to see a form that strikes the right balance for us – a balance between the interests of the founders as well as those of the investors. While historically investors have usually had more negotiating leverage than founders, sometimes we feel the pendulum has swung too far, and now smaller angel investors may well be the ones under pressure to accept unbalanced terms. The KISS legal docs were built on the shoulders of our predecessors and were designed with balance and simplicity in mind.”
Looking for good convertible note documentation head here to 500.co/KISS to get started.