Guide to the legal aspects of early stage financing

Early stage financing involves the following parties: a start-up business looking for cash, and venture investors looking to make an investment. This paper discusses the legal aspects of early stage financing, including venture investors, differing interests between investors and business, determination of the bundle of rights, the nonbinding term sheet, purchase price and valuation, preserving value, conversion and conversion price, redemption and dividends, liquidation preference, board seat/information rights, voting rights/protective provision, right of first refusal/special features, registration rights, definitive agreements, and finally legal issues or risks associated with a technology deal.