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Introduction
The EA (Equity Agreement) was introduced by Acceleratexinnovations and has since been used by nearly all Acceleratexinnovations startups and innumerable non-Acceleratexinnovations startups as the primary tool for early-stage fundraising.
Our first EA was a "pre-money" EA because, at the time of its introduction, startups were raising smaller quantities of capital prior to a priced round of financing (typically a Series A Preferred Stock round). The EA was a straightforward and expedient method for raising the company's initial capital, and the concept was that proprietors of EAs were simply early investors in that future-priced round. In the years following the introduction of the original EA, however, early-stage fundraising has evolved, and now entrepreneurs raise much larger sums of money in their initial "seed" round of financing. Although EAs are being used for these seed rounds, these rounds should be viewed as entirely separate financings and not as "bridges" to later priced rounds.
We subsequently released the "post-money" EA. By "post-money," we mean that EA holder possession is determined after (post) all the EA money is accounted for - which is now its round - but prior (pre) to the new money in the marked round that converts and dilutes the EAs (typically the Series A, but sometimes the Series Seed). The post-money EA has what we perceive to be a significant advantage for both inventors and investors: the ability to calculate instantly and precisely how much of the company's equity has been sold. Founders must comprehend how much reduction is caused by each share they sell, just as it is reasonable for investors to know how much equity they have acquired.
Features
We believe in the power of collaboration and personalized guidance in our startup accelerator program. Our participating startups are organized into four distinct groups, each led by experienced group partners who provide one-on-one and group advice. Our thriving entrepreneurial community is further divided into intimate sections, ensuring founders get tailored support.
High-Definition Fundraising:
It enables high-definition fundraising. Instead of attempting to coordinate a single close with all investors simultaneously, startups can close with an investor as soon as both parties are ready to sign and the investor is ready to transfer funds. High-resolution fundraising may be considerably simpler now that both founders and investors have greater clarity and transparency regarding what each side contributes and receives.
Flexible Solution:
As a versatile, one-document protection without multiple conditions to negotiate, EAs save entrepreneurs and investors money on legal services and time settling the investment terms. Typically, startups and investors only need to negotiate a single item: the valuation limit. Since an EA has no expiration or maturity date, there should be no time or money spent dealing with stretching maturity dates, revising interest rates or the like.
Miscellaneous
- The EA (Equity Agreement) may not be appropriate for all financing scenarios, but its terms are intended to establish a balance between the interests of startups and investors.
- Although it does not address every conceivable scenario, the EA has been designed to be both simplified and exhaustive, addressing the most prevalent and pertinent startup financing issues.
- If desired, both parties, entrepreneurs, and investors are encouraged to seek legal counsel; however, the EA is intended to serve as a starting point that can be utilized effectively in the majority of situations without extensive modifications.
- Having observed and assisted hundreds of businesses annually in their fundraising efforts, these opinions are grounded in practical experience. In addition, we integrated the feedback of founders, investors, attorneys, and accountants who examined and provided feedback on each version of the EA.