Startup Investment Agreement for the United States

Startup Investment Agreement Template for United States

A Startup Investment Agreement is a legally binding document used in the United States that outlines the terms and conditions under which an investor provides capital to a startup company in exchange for equity or other securities. The agreement complies with federal securities laws and applicable state regulations, detailing investment amount, valuation, ownership rights, investor protections, and governance provisions. It typically includes representations and warranties from both parties, closing conditions, and various protective provisions for both the investor and the company.

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What is a Startup Investment Agreement?

The Startup Investment Agreement is essential for early-stage companies seeking capital investment in the United States. This document is typically used when startups are raising seed funding, Series A, or subsequent investment rounds. It serves as the primary contract governing the relationship between investors and the company, detailing crucial elements such as investment terms, valuation, equity rights, and investor protections. The agreement must comply with SEC regulations, state securities laws, and other relevant U.S. federal statutes. A well-structured Startup Investment Agreement helps prevent future disputes by clearly defining expectations, rights, and obligations of all parties involved.

What sections should be included in a Startup Investment Agreement?

1. Parties: Identification of the investor(s) and the company receiving investment

2. Background: Context of the investment and brief company overview

3. Definitions: Key terms used throughout the agreement

4. Investment Terms: Amount, valuation, and type of securities being purchased

5. Representations and Warranties: Statements of fact by both parties about their ability to enter into the agreement and compliance with securities laws

6. Closing Conditions: Prerequisites that must be met before the investment is completed

7. Transfer Restrictions: Limitations on the transfer of securities and right of first refusal provisions

8. Termination: Circumstances under which the agreement may be terminated

9. Miscellaneous: Standard legal provisions including governing law, notices, and amendments

What sections are optional to include in a Startup Investment Agreement?

1. Anti-dilution Provisions: Protection mechanisms against future down rounds, typically included for sophisticated investors

2. Board Rights: Provisions granting investor rights to board representation, common in larger investments

3. Information Rights: Rights of investors to receive periodic financial information and inspection rights

4. Pre-emptive Rights: Right of investors to participate in future funding rounds to maintain their ownership percentage

5. Tag-Along Rights: Rights allowing investors to join in the sale of shares by founders or major shareholders

What schedules should be included in a Startup Investment Agreement?

1. Schedule A - Capitalization Table: Current and post-investment ownership structure of the company

2. Schedule B - Disclosure Schedule: Exceptions to representations and warranties made in the main agreement

3. Schedule C - Form of Stock Certificate: Template for the stock certificates to be issued to the investor

4. Schedule D - Investment Rights Agreement: Detailed terms of investor privileges and protections

5. Schedule E - Company Financial Statements: Recent financial statements and projections of the company

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Securities Act of 1933: Primary federal law governing the initial offering and sale of securities, requiring registration unless an exemption applies

Securities Exchange Act of 1934: Federal law regulating secondary market trading of securities and establishing the SEC

Regulation D: SEC rules providing exemptions from securities registration requirements, particularly Rules 506(b) and 506(c) for private placements

JOBS Act of 2012: Legislation easing securities regulations for smaller companies, including provisions for crowdfunding and general solicitation

Blue Sky Laws: State-specific securities laws governing the offering and sale of securities within each state's jurisdiction

Delaware General Corporation Law: Primary corporate law framework if the startup is incorporated in Delaware, governing corporate structure and shareholder rights

Internal Revenue Code Section 1202: Tax provisions regarding Qualified Small Business Stock (QSBS) offering potential tax benefits for eligible startup investments

CFIUS Regulations: Requirements for review of foreign investments in U.S. companies that may have national security implications

FIRRMA: Foreign Investment Risk Review Modernization Act expanding CFIUS jurisdiction over foreign investments in U.S. technology companies

State Contract Laws: State-specific laws governing contract formation, enforcement, and interpretation

Investment Company Act of 1940: Federal law regulating investment companies and providing exemptions for venture capital and private equity investments

Regulation Crowdfunding: SEC rules implementing JOBS Act provisions for equity crowdfunding, setting requirements for such offerings

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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