In 2003, a group of approximately two dozen lawyers specializing in venture capital (VC) finance embarked on a mission to standardize the financing documents utilized by VC firms for investments in US-based startups. The primary objective was to mitigate the transaction costs associated with memorializing the non-binding term sheet negotiated between a company and a VC investor. While a term sheet typically outlines the standard economic and governance terms (e.g., valuation, type of liquidation preference, the number of investor- and founder-appointed directors), translating these core “deal” terms into definitive financing documents often entailed further negotiation. This additional negotiation occurred as both investor and company counsel sought to converge on the precise contractual language that would legally govern the investment. The standardization project aimed to curtail this latter form of negotiation by establishing a standard “template” for each of the five documents used in US VC finance. Since December 2003, the National Venture Capital Association (NVCA) has hosted these templates on its website, leading to their colloquial reference as the “NVCA financing documents.” READ MORE