What is Series AA?
The Y Combinator Series AA is a set of standardized legal documents for equity financing rounds, specifically designed for YC-funded startups raising capital from angels and early-stage investors, typically in the 2M range.Series AA is a lightweight preferred equity financing structure with simple terms that are generally balanced but lean toward being founder-friendly. The “AA” designation distinguishes these seed-stage documents from later “Series A” venture capital rounds.
Purpose & Philosophy
Y Combinator created Series AA documents to make equity financings:Faster
Streamlined process reduces time from weeks to days
Simpler
Eliminates unnecessary complexity for seed-stage deals
Founder-Friendly
Balanced terms that show trust in entrepreneurs
Cost-Effective
Reduces legal fees through standardization
When to Use Series AA
Series AA documents are appropriate when:You’ve converted SAFEs and are ready for a priced equity round
Angels want equity instead of convertible instruments
You have product-market fit and recurring revenue
Round size is 2M from multiple angel investors
Document Package
The complete Series AA package includes six key documents:- Term Sheet
- Stock Purchase Agreement
- Certificate of Incorporation
- Investors' Rights Agreement
- Board Consent
- Stockholder Consent
Series AA Term Sheet
Non-binding summary of key economic and governance terms for the financing.Key Sections
Economic Terms
Economic Terms
- Amount Raised: Total size of financing round
- Pre-Money Valuation: Company value before new investment
- Price Per Share: Calculated from valuation and shares outstanding
- Liquidation Preference: 1x non-participating (standard)
- Dividends: Typically none for Series AA
Conversion Rights
Conversion Rights
- Automatic Conversion: Upon IPO or qualified financing
- Optional Conversion: At holder’s discretion
- Conversion Rate: Initially 1:1 preferred to common
- Anti-Dilution: Broad-based weighted average protection
Governance
Governance
- Board Composition: Typically 3-5 members
- Protective Provisions: Key decisions requiring investor approval
- Information Rights: Regular financial reporting
- Pro Rata Rights: Ability to maintain ownership in future rounds
What Makes It Founder-Friendly
- 1x liquidation preference (not 2x or 3x)
- Non-participating preferred (no “double dipping”)
- Broad-based weighted average anti-dilution (less dilutive)
- Minimal protective provisions
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Comparison: Series AA vs. Alternatives
- vs. SAFE
- vs. Series Seed
- vs. NVCA Series A
Series AA vs. SAFE
| Aspect | Series AA | SAFE |
|---|---|---|
| Timing | Immediate equity | Future equity |
| Valuation | Set now | Set at future round |
| Ownership | Clear from day one | Uncertain until conversion |
| Complexity | Moderate (6 docs) | Simple (1 doc) |
| Cost | Higher legal fees | Minimal legal fees |
| Investor Rights | Immediate board/info rights | None until conversion |
| Best For | Established startups | Very early stage |
Use SAFE when: Pre-product, can’t set valuation, need to move fast
Use Series AA when: Post-product, clear valuation, ready for equity investors
Typical Terms Summary
Standard Series AA terms for a typical round:Economics
- Liquidation: 1x non-participating
- Anti-dilution: Broad-based weighted average
- Dividends: None typically
- Conversion: 1:1 with adjustments
Control
- Board: Typically 2 founders, 1-2 investors
- Protective provisions: Minimal
- Voting: As-converted basis
- Approval rights: Major decisions only
Investor Rights
- Information rights: Annual/quarterly
- Pro rata: For major investors
- Registration: Standard IPO rights
- ROFR: On founder sales
Closing Process
Typical timeline and steps for a Series AA financing:Negotiate & Sign Term Sheet
Timeline: 1-2 weeks
- Agree on key terms with lead investor
- Execute non-binding term sheet
- Term sheet is starting point for documents
Prepare Documents
Timeline: 1-2 weeks
- Attorney drafts documents based on term sheet
- Customize YC templates for your specific terms
- Prepare cap table showing post-financing ownership
Due Diligence
Timeline: 1-2 weeks (concurrent with docs)
- Investors review company information
- Legal review of corporate documents
- Financial review of statements
- IP review (if applicable)
Document Review & Negotiation
Timeline: 1 week
- Investors review draft documents
- Negotiate any changes (typically minimal)
- Finalize all documents
Obtain Approvals
Timeline: 1-3 days
- Execute Board Consent
- Execute Stockholder Consent
- Both typically via DocuSign or similar
Total Timeline: Typically 4-6 weeks from term sheet to closing for a Series AA round. This is significantly faster than traditional VC rounds which can take 2-3 months.
Best Practices
Choose the Right Time
Choose the Right Time
Don’t raise Series AA too early. Best after:
- You’ve launched product
- You have some revenue or clear path to revenue
- You can justify a reasonable valuation
- You’ve converted existing SAFEs or notes
Set Realistic Valuation
Set Realistic Valuation
Series AA requires setting a valuation. Make sure it’s:
- Justified by traction and metrics
- Leaves room to grow into next round
- Allows you to raise sufficient capital
- Not so high that you can’t raise Series A
Clean Up Cap Table First
Clean Up Cap Table First
Before Series AA:
- Convert all SAFEs and convertible notes
- Buy out or convert any old option holders
- Ensure all stock grants are properly documented
- Have clean option pool ready
Negotiate Minimally
Negotiate Minimally
YC documents are already founder-friendly:
- Don’t try to make them even lighter
- Accept standard terms to close quickly
- Save negotiating energy for larger rounds
- Speed is more valuable than perfect terms
Work with Startup Counsel
Work with Startup Counsel
Even with standard docs, you need a lawyer:
- Review all documents before signing
- Customize schedules and exhibits
- Ensure compliance with securities laws
- File necessary documents with state
Resources & Downloads
Official Y Combinator Resources
Series AA Official Page
Main page with all document downloads
Term Sheet (Docracy)
Web version of term sheet
All Document Downloads
Complete Document Set
Complete Document Set
Alternative Formats
OpenLaw Template
Automated term sheet generation
Techstars Alternative
Similar seed-stage documents from Techstars
Related Documents
For incorporation before financing:- Certificate of Incorporation - Initial corporate charter
- Bylaws - Corporate governance rules
- SAFE Agreements - Convertible instrument alternative
- Series Seed - Alternative seed equity documents
- Convertible Notes - Debt-based alternative
FAQ
Is Series AA right for my company?
Is Series AA right for my company?
Series AA is best if:
- You’re raising 2M from angels
- You have clear traction and can set valuation
- You’re past the SAFE stage
- You want simple, founder-friendly terms
- You’re pre-product or can’t justify valuation (use SAFE)
- You’re raising from institutional VCs (use NVCA or Series Seed)
- You’re raising under $250K (use SAFEs)
Can I modify the documents?
Can I modify the documents?
Yes, but:
- Documents are meant to be starting templates
- Customize financial terms (amount, valuation, etc.)
- Generally avoid modifying standard legal provisions
- Work with attorney to ensure modifications are appropriate
- Over-customization defeats purpose of standardization
What about international companies?
What about international companies?
YC documents are for Delaware corporations:
- Not suitable for non-US companies
- Need to adapt significantly for other jurisdictions
- Consider YC-style principles but local documents
- Work with local counsel familiar with startup financings
How much will legal fees be?
How much will legal fees be?
Typical range:
- With standard YC docs: 15,000
- With significant customization: 25,000
- Depends on: Round size, number of investors, complexity
- Save by: Using standard terms, organized documents, decisive decision-making
Next Steps
Review All YC Docs
Explore complete YC document collection
Compare Alternatives
See other financing document options
Learn About SAFEs
Understand convertible alternative