Fundraising agreement template

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.

What is a fundraising agreement?

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.

What is the purpose of a fundraising agreement?

The primary purpose of a fundraising agreement is to establish clear, binding terms for the investment. It protects both parties by:

• Clearly outlining the amount of investment and how it will be used
• Specifying the equity or return the investor will receive
• Defining the timeline and conditions for the investment
• Setting forth the rights and obligations of each party

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.

Who manages fundraising agreements?

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.

When are fundraising agreements used?

Fundraising agreements are used in various stages of a company’s lifecycle, including:

Seed funding

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.

Series A, B, C funding

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.

Private equity investments

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.

Venture capital funding

For high-growth startups looking to scale rapidly. Venture capital agreements usually emphasise investor protections and mechanisms for achieving high returns.

What should a fundraising agreement template include?

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.

How are fundraising agreements usually managed?

Managing fundraising agreements manually involves several steps:

1. Drafting – The legal team drafts the agreement, incorporating input from finance and executive teams. This often involves multiple rounds of revisions to ensure all parties’ concerns are addressed.
   
   
2. Review – Multiple stakeholders review the draft, often resulting in several rounds of edits. This process can be time-consuming, especially if there are significant changes requested by different parties.
   
   
3. Approval – Once the draft is finalised, it requires approval from all parties involved. This stage can lead to delays if there are conflicting schedules or additional negotiations needed.
   
   
4. Execution – The agreement is signed by authorised representatives. In some cases, signatures may be required in person, which can further delay the process.
   
   
5. Storage – The executed agreement is stored, usually in a shared drive or physical file. Manual storage can make it difficult to track and retrieve agreements when needed.

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.

Manage fundraising agreements better with Juro

Juro's AI-native contract management platform can streamline the entire lifecycle of fundraising agreements, from creation to execution and storage. Here's how:

• Centralized contract creation and collaboration: Juro allows all parties involved in a fundraising agreement to work together in one browser-native workspace. Teams can draft, review and negotiate terms in real-time, ensuring everyone stays on the same page.
• Automated workflows: Juro's automated workflows ensure that key milestones and deadlines are met. The platform can automate approval processes and send reminders for important dates, which reduces the administrative burden and keeps the process on track.
• Template management: Create and store standardized templates for fundraising agreements, ensuring consistency and compliance. This allows new agreements to be generated quickly based on pre-approved templates, saving time and reducing errors.
• Electronic signatures: Juro supports legally binding eSignatures, allowing for quick and secure signing of fundraising agreements. This eliminates the need for physical paperwork and speeds up the execution process.
• Integrated systems: Juro integrates with existing tools like CRM, email and storage solutions, enabling seamless data transfer and reducing manual entry. This integration ensures that all relevant information is easily accessible and up-to-date.
• Contract repository: Store all fundraising agreements in a secure, searchable contract database. This centralised storage provides easy access to documents and valuable insights into contract status, performance and compliance.
• Reporting and analytics: Juro's platform provides robust reporting and analytics capabilities, offering insights into contract performance and helping identify potential risks or bottlenecks. These insights can inform strategic decisions and improve overall contract management.
• Version control and audit trails: Keep track of all changes made to fundraising agreements with Juro’s version control and audit trail features. This ensures transparency and accountability throughout the contract lifecycle.

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.