Bringing on New Investors After the Seed Round: Navigating the First Priced Financing

40 questions on bringing on new investors after the seed round, answered and cited by the UpLaw editorial team.

• Does my company have to be a Delaware C corporation to raise a priced round?
• Do I need the full priced-round machinery just to add one more small investor?
• Do venture preferred shares pay dividends?
• How can a board protect itself when insiders lead a financing?
• How does a company amend its certificate of incorporation to create a new preferred series?
• How do existing stockholder agreements get amended to add a new investor?
• How do SAFEs and convertible notes convert in a priced round?
• How is a priced round different from a seed round?
• How is the board structured after a Series A?
• How is the price per share calculated in a venture financing?
• How much ownership do founders typically lose in a first priced round?
• How should founders manage the investor relationship after the round closes?
• How should founders negotiate the size of the option pool?
• What are pro-rata rights, and do my existing seed investors have them?
• What are protective provisions in a venture financing?
• What are registration rights, and do they matter at the Series A?
• What are rights of first refusal and co-sale rights?
• What can founders do to reduce dilution in a priced round?
• What consents does a company need to close a priced round?
• What documents are used in a priced venture round?
• What extra complications do convertible notes create compared to SAFEs?
• What fiduciary standard applies to an insider-led down round?
• What information must a company give its investors after a priced round?
• What is a down round, and what changes when a company raises one?
• What is a drag-along right?
• What is a liquidation preference?
• What is anti-dilution protection, and how does it differ from a pro-rata right?
• What is a pay-to-play provision?
• What is a shadow series, and why do converting SAFEs get one?
• What is participating preferred stock, and should founders accept it?
• What is the difference between a pre-money SAFE and a post-money SAFE?
• What is the difference between broad-based weighted average and full ratchet anti-dilution?
• What is the difference between pre-money and post-money valuation?
• What is the option pool shuffle?
• What securities-law exemption applies to a priced venture round?
• What will a new lead investor diligence before a follow-on round?
• When does preferred stock convert into common stock?
• When must a company file Form D for a new financing round?
• Why does a company need a new 409A valuation after a priced round?
• Why do two cap tables for the same company show different ownership percentages?