Securing funds is a crucial step for any growing business. Use this free fundraising agreement template to speed up the contracting process.
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Securing funds is a crucial step for any growing business. Fundraising agreements play a vital role in ensuring that both the company and the investors are aligned and protected. This guide will walk you through the essentials of fundraising agreements, what they should include and how you can streamline the process using a fundraising agreement template.
A fundraising agreement is a legal document that outlines the terms and conditions between a company seeking funds and the investors providing those funds. This contract defines the obligations, rights and responsibilities of each party, ensuring transparency and legal compliance.
Fundraising agreements are commonly used in various types of funding rounds (see below for some common examples). These agreements provide a clear framework for the investment relationship.
The primary purpose of a fundraising agreement is to establish clear, binding terms for the investment. It protects both parties by:
By detailing these aspects, a fundraising agreement ensures that both the company and the investor have a mutual understanding of the investment terms. This helps in building trust and maintaining a positive relationship between the parties involved.
Fundraising agreements are typically managed by the company's legal team, with input from the finance and executive teams. Investors also have their legal counsel review these agreements to ensure their interests are protected. In some cases, external legal advisors or law firms may be involved to provide additional expertise.
The involvement of multiple stakeholders in the drafting and review process highlights the importance of clear communication and collaboration. Legal, finance and executive teams must work together to ensure that the agreement aligns with the company’s strategic goals and complies with legal requirements.
Fundraising agreements are used in various stages of a company’s lifecycle, including:
When a company is raising its first round of funding to develop its product or service. Seed funding agreements often include terms related to the initial equity stake that investors will receive in exchange for their investment.
Subsequent rounds of investment as the company grows and seeks additional capital. Each funding round typically involves new terms and conditions, reflecting the company’s evolving valuation and growth objectives.
When larger sums of money are invested by private equity firms to scale the business. These agreements often include detailed provisions regarding control rights and exit strategies.
For high-growth startups looking to scale rapidly. Venture capital agreements usually emphasise investor protections and mechanisms for achieving high returns.
A comprehensive fundraising agreement template should include certain key elements (detailed below). However, there will also be other factors that come into play when managing a fundraising agreement, depending on the series and nature of the funding. It’s always best to speak to internal or external legal counsel to clarify these.
Introduction. Identify the company and investors, and specify the date of the agreement.
Investment details. State the amount of investment and describe the purpose of the funds.
Equity and shares. Define the type and number of shares or equity percentage, and include the company’s valuation and how it was determined.
Terms and conditions. Outline the investment timeline, key milestones and any conditions precedent to the investment.
Rights and obligations. Specify the voting rights, board seats and information rights, including regular financial and operational reporting for investors.
Representations and warranties: Include statements about the company’s financial status, legal compliance, and other relevant assurances given by both parties.
Confidentiality. Outline the obligations of both parties to maintain confidentiality of sensitive information.
Dispute resolution. Specify the methods for resolving disputes, such as mediation or arbitration.
Termination. Detail the conditions under which the agreement can be cut short.
Signatures. Include the signatures of authorised representatives from both parties to formalise the agreement.
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Managing fundraising agreements manually involves several steps:
This manual process can be time-consuming and prone to errors, leading to delays in the fundraising progress and costly risks. Miscommunications and missed deadlines can result in financial and legal consequences for the company.
Juro's AI-native contract management platform can streamline the entire lifecycle of fundraising agreements, from creation to execution and storage. Here's how:
By leveraging Juro, companies can manage their fundraising agreements more efficiently, ensuring smoother negotiations, faster approvals and better compliance.
Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.
A fundraising agreement template is a starting document for setting out the terms on which investors put money into a company. It records how much each investor puts in and what they get in return, such as shares and any voting or information rights.
Usually, yes. Without one, it’s easy for each side to remember the deal differently, for example whether a payment was a loan or a purchase of shares, and that can cause problems when you raise a larger round later. New investors normally check your past funding paperwork during due diligence.
A share subscription agreement is the specific contract in which an investor agrees to buy new shares at a set price. A fundraising agreement is a broader term for the documents that set the terms of an investment, and in a priced equity round the subscription agreement is often one of them.
Liquidation preferences decide who gets paid first, and how much, if the company is sold or wound up, so they can matter more than the headline valuation. Founders should also check any veto rights and board seats, because these affect who controls major decisions after the round.
No. A term sheet is a short summary of the main deal terms that the company and lead investor agree before the full documents are drafted. Most of a term sheet is usually not legally binding, although terms like confidentiality and exclusivity often are.
Conditions precedent are things that must happen before the investor has to pay, such as shareholder approval or the signing of other investment documents. If a condition isn’t met by the agreed date, the investor can normally walk away.
It’s a useful starting point, but investment terms vary a lot between rounds, and selling shares can trigger securities rules that depend on where the company and investors are based. For specific legal advice on your contract templates, consult an attorney.
Keep the approved template in Juro and generate each investor’s agreement from it, with finance adding the amount and share details for that investor. If your standard terms change before the next round, you update that one template and every new agreement follows. Signed agreements are stored together, so you can search them for investor rights and key dates such as reporting deadlines.
Yes. In Juro, Operator can produce a first draft of a new template using what it learns from your existing contracts, including your drafting style and the positions you usually take on terms like investor rights and confidentiality. Legal reviews and approves it before anyone uses it, so the template reflects your risk appetite.
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