- Purchase terms - Number of shares, price per share, total investment
- Closing conditions - Requirements that must be met before closing
- Representations and warranties - Statements about the company’s legal status and business
- Investor representations - Accredited investor status and investment suitability
- Covenants - Ongoing obligations of the company
Overview
The Techstars Series AA document set provides a complete package for preferred stock financing rounds in the 2M range. These documents create a clean capital structure with preferred stock that includes standard protective provisions while maintaining entrepreneur-friendly terms.Financing Range
Designed for seed rounds between 2,000,000
Document Philosophy
Simple, balanced terms that lean toward trusting and empowering entrepreneurs
Complete Document Set
The Techstars Series AA financing includes four primary documents:1. Restated Articles of Incorporation
Purpose and Key Provisions
Purpose and Key Provisions
The Restated Articles of Incorporation (or Amended and Restated Certificate of Incorporation for Delaware corporations) establishes the legal framework for the Series AA preferred stock.Key provisions include:
- Authorized shares - Total authorized common and preferred stock
- Series AA rights and preferences - Voting, dividend, and liquidation rights
- Conversion rights - How and when preferred converts to common
- Anti-dilution protection - Typically broad-based weighted average
- Protective provisions - Investor consent rights for major corporate actions
Liquidation Preference
Liquidation Preference
The Series AA preferred typically includes a 1x non-participating liquidation preference:
- Investors receive their investment amount back before common stockholders
- After the preference is paid, preferred converts to common and participates ratably
- No participation rights (“non-participating preferred”)
- Clean and simple structure without complex waterfalls
Conversion Rights
Conversion Rights
Series AA preferred is convertible to common stock:
- Automatic conversion - Triggers on qualified IPO or specified events
- Optional conversion - Investor can convert at any time
- Conversion ratio - Initially 1:1, subject to anti-dilution adjustments
- Anti-dilution - Broad-based weighted average protection against down rounds
2. Bylaws
Corporate Governance Framework
Corporate Governance Framework
The Series AA Bylaws establish the rules for corporate governance and internal management.Key sections cover:
- Board composition - Number of directors, election procedures, terms
- Meeting requirements - Notice periods, quorum requirements, voting procedures
- Officer roles - Appointment, duties, and removal of corporate officers
- Stock certificates - Issuance and transfer of shares
- Amendment procedures - How bylaws can be modified
Board Structure
Board Structure
Typical Techstars Series AA board structures:
- Small boards (3-5 members) in early stages
- Founder representation (typically 1-2 seats)
- Investor representation (1-2 seats based on investment size)
- Independent directors as company matures
3. Subscription Agreement
Primary Purchase Contract
Primary Purchase Contract
The Subscription Agreement is the main contract between the company and investors for the purchase of Series AA preferred stock.Key components:
Representations and Warranties
Representations and Warranties
Companies make standard representations about:
- Organization and standing - Valid incorporation and good standing
- Capitalization - Current cap table and outstanding securities
- Authorization - Board and stockholder approval of the financing
- Financial statements - Accuracy of provided financial information
- Intellectual property - Ownership of key company IP
- Litigation - Disclosure of pending or threatened legal matters
- Compliance - Adherence to applicable laws and regulations
Closing Conditions
Closing Conditions
Typical conditions that must be satisfied before closing:
- Receipt of all required corporate approvals
- Execution of all transaction documents by all parties
- Satisfactory completion of legal due diligence
- No material adverse changes since term sheet execution
- Delivery of legal opinions (if required)
- Payment of transaction expenses
4. Board Member Election Consent
Board Approval Document
Board Approval Document
The Board Consent documents the board of directors’ approval of the Series AA financing.Typical resolutions include:
- Approval of the Series AA financing terms
- Authorization of the Restated Articles of Incorporation
- Approval of the Subscription Agreement
- Authorization to issue Series AA preferred stock
- Appointment of officers to execute documents
- Ratification of expenses related to the financing
Written Consent Process
Written Consent Process
For efficiency, board approval is typically done via written consent rather than a formal meeting:
- All directors sign the consent document
- Effective immediately upon receipt of all signatures
- No meeting notice or quorum requirements
- Must be filed with corporate records
Key Terms and Provisions
The following terms are typical in Techstars Series AA financings, but specific terms are negotiated for each round.
Valuation and Economics
Pre-Money Valuation
Pre-Money Valuation
- Negotiated between company and investors
- Typically 10M for seed-stage companies
- Sets the price per share for the Series AA
- Determines founder dilution from the round
Option Pool
Option Pool
Investors typically require an option pool for hiring:
- Usually 10-20% of post-money capitalization
- Created pre-money (dilutes founders, not investors)
- Reserved for future employee equity grants
- Unallocated pool shares dilute founders’ ownership percentage
Investor Rights
Protective Provisions
Protective Provisions
Series AA investors typically receive consent rights (veto power) over:
- Changes to certificate of incorporation affecting Series AA rights
- Creation of new preferred stock classes senior to or pari passu with Series AA
- Sale or merger of the company
- Amendments to bylaws
- Changes to authorized shares
- Payment of dividends or redemption of stock
Information Rights
Information Rights
Investors holding significant stakes typically receive:
- Annual audited financial statements
- Quarterly unaudited financial statements
- Monthly financial reports and metrics
- Annual budgets and strategic plans
- Access to inspect company facilities and records
Pro Rata Rights
Pro Rata Rights
Major investors often negotiate the right to participate in future financing rounds:
- Maintains investor’s ownership percentage
- Typically requires minimum investment threshold
- May be tiered based on initial investment size
- Usually limited to future priced rounds (not SAFEs or notes)
Financing Process
Here’s the typical timeline for a Series AA financing using Techstars documents:Phase 1: Preparation (1-2 weeks)
- Organize corporate records and cap table
- Prepare financial information and data room
- Engage legal counsel
- Draft initial term sheet
Phase 2: Negotiation (1-2 weeks)
- Negotiate term sheet with lead investor
- Finalize economic terms (valuation, amount, option pool)
- Agree on governance terms (board seats, protective provisions)
- Execute non-binding term sheet
Phase 3: Documentation (2-3 weeks)
- Counsel drafts transaction documents
- Investor conducts legal due diligence
- Review and negotiate document terms
- Obtain board and stockholder approvals
Phase 4: Closing (1 week)
- Execute all transaction documents
- Wire transfer of investment funds
- Issue stock certificates
- File Restated Articles with the state
- Update cap table and corporate records
Using standardized documents like the Techstars Series AA set can reduce documentation time by 1-2 weeks compared to custom drafting.
Comparison with Alternative Structures
Series AA vs. Convertible Notes
| Feature | Series AA Equity | Convertible Notes |
|---|---|---|
| Valuation | Set immediately | Deferred to future round |
| Complexity | Moderate | Lower |
| Timeline | 4-6 weeks | 2-3 weeks |
| Investor rights | Immediate voting/control | Delayed until conversion |
| Cap table impact | Clean equity structure | Debt on balance sheet |
| Best for | Larger rounds, lead investors | Bridge rounds, quick capital |
Series AA vs. SAFE
| Feature | Series AA Equity | SAFE |
|---|---|---|
| Legal status | Equity security | Contractual right |
| Investor rights | Voting, information, board | None until conversion |
| Complexity | Moderate | Very low |
| Timeline | 4-6 weeks | Days to weeks |
| Legal costs | 25k | 5k |
| Best for | Institutional rounds | Angel/rolling closes |
Bridge Financing Alternative
For situations where equity financing isn’t the right fit, Techstars also provides bridge financing documents using convertible notes:Bridge Term Sheet
Outlines key terms for convertible note financing including interest rate, maturity, discount, and conversion mechanics.
Note Purchase Agreement
The purchase contract between company and noteholders for the convertible note financing.
Convertible Promissory Note
The actual convertible note instrument with debt terms and equity conversion provisions.
Best Practices
Legal Counsel
Legal Counsel
Always engage experienced startup counsel for any equity financing:
- Review and customize standard forms for your situation
- Ensure compliance with securities laws and regulations
- Negotiate investor-requested changes
- Coordinate closing logistics and filings
- Update cap table and corporate records
Cap Table Management
Cap Table Management
Maintain a clean and accurate capitalization table:
- Use professional cap table software (Carta, Pulley, AngelList)
- Document all equity grants and exercises
- Track vesting schedules for founders and employees
- Model dilution from future financing rounds
- Provide clear reporting to current stockholders
Board Communication
Board Communication
Once you have investor board members:
- Provide board materials 3-5 days before meetings
- Include financial reports, KPIs, and strategic updates
- Be transparent about challenges and risks
- Seek board input on major decisions
- Maintain regular communication between meetings
Resources
Official Techstars Blog
Comprehensive explanation of the Techstars model documents with download links and usage guidance.
Techstars Overview
Return to the main Techstars documents overview.
View Techstars overview →
Additional Resources
For comparison with other standard document sets:- Y Combinator Series AA Documents - Similar entrepreneur-friendly approach
- Series Seed Documents - Alternative standardized seed financing documents
- NVCA Documents - More investor-friendly professional VC documents
Techstars model documents are open source and freely available for use by any startup, not just Techstars portfolio companies.