Quick Compare-and-Contrast of the Y Combinator and TechStars Series AA Model Documents

It's very clear to me that these documents were substantially informed by the YC docs' terms but that they were adapted from standard VC documents, and aren't just mere re-wordings of the YC documents.  Again, these documents and the YC docs are for the round *after* TS/YC funding.  Lastly, I'm just comparing the Term Sheets here (although I've browsed through the legal documents).  For my analysis of the YC documents, see my previous blog post.

Substantively, the instrument is the same as the Series AA Shares in the YC documents: convertible non-participating 1.0x preferred stock at a 1:1 conversion ratio.  Both the YC and TS Series AA documents give the Series AA investors rights to participate, on a pro rata basis (to maintain their ownership percentage of the Company after the closing of the Series AA round), in any subsequent financings.  However, there are many things in the TechStars documents that aren't in the YC documents. 

First, there is a three-member Board of Directors that splits 2/1 founders/Series AA investor representative.  There is no mention of the Board composition in the YC AA docs.  Second, the TS documents introduce the idea of a "Qualified IPO", which is a standard VC term sheet concept.  Again, the YC documents are silent on this.  Third, there are specific notes about conversion price adjustments in the TS documents - the "broad-based weighted average anti-dilution protection (with customary exceptions)" is pretty standard language for a formal VC round that protects the investor in a down round.  For a description of weighted average anti-dilution, see Yokum's post on the matter on his indispensable Startup Company Lawyer blog.  Lastly, it's nice to see that each side is specifically responsible for their own fees in conjunction with the Series AA round. 

There is something in the YC documents that isn't in the TS documents - the 180 day holding period for insiders.  Again, the 180 day period is awfully optimistic (especially in this environment), but it raised an eyebrow that the TS documents chose not to, at least, contain every term in the YC documents.  Again, this is probably due to the TS documents coming from Cooley's standard VC round documents rather than being a Cooley version of the Wilson Sonsini YC documents.  Further evidence for my theory is that, as of this writing, the Protective Provisions part of the TS term sheet makes reference to Series A, not Series AA.  (Associate lawyer/paralegal oops.  :) ) 

To me, I prefer the Cooley/TechStars documents, if only because they're more similar to standard VC documents, and I like that level of familiarity and I have nostalgia for the days when I'd wake up at 4am for a flight across the country.  (Note: not true - I hate to travel and I really hate to wake up early.)  The instruments are the same, however, and this is essentially just a style preference on my part.  If you have any questions, fire away in the comments. 
6 responses
Just FYI - We have been using these documents since well before YC released theirs - they're not based on them or "informed by them" in any way.
David, exactly - as I said, these docs were clearly adopted from standard Series A docs and have a different "feel" than the YCombinator docs. The instrument and the terms are identical is all. And I prefer your docs for completeness. :)
Cool, thanks for checking them out. I hope they can help a few people. I was just reacting to "It's very clear to me that these documents were substantially informed by the YC docs' terms" in my previous comment.
he instruments are the same, however, and this is essentially just a style preference on my part.
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