Craig's Angel and Seed round investment terms "traffic light" (for Southeast Asia)

	A	B	C
1	term	definition	comments/light
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3	first refusal	Other investors and startup founders who agree to this stipulation must offer to sell their shares to the original investor first. If they decline, then they are free to sell their shares to the highest bidder. This offers an investor some control over who owns equity in a company.	Not a big deal. Ok for founder's to accept.
4	tag-along rights	if a founder decides to sell their shares to a potential buyer, the original investor can demand that their shares are offered to the buyer for the same amount. If the buyer is unable or unwilling to purchase both founder and investor shares for the same price, then the founder cannot sell their stake. Again, this provides an element of control where an investor can put a halt on a sale or ensure that they receive a return on their investment when a founder sells up.	Not a big deal. Ok for founder's to accept.
5
6	1x liquidation preference	Investor gets their money back in the event of a liquidation, even if their shareholding would pay them less.	Fairly standard; ideally would avoid. Do not do more than 1x if at all possible. Shouldn't be included in Angel rounds.
7	pro-rata rights	Investors get option to invest in later rounds to maintain their % ownership.	Fairly standard; ideally would avoid.
8	equity terms prior to Seed/Series A	Investor gets equity in return for investment (not con note or SAFE)	Adds complexity and expense - use SAFEs. However may need to do equity round on VC docs at Seed.
9	finder's fee	An agent charges a fee to find investors for a startup.	Not ideal. NEVER pay more than 5%. Try to avoid or pay less.
10	Discount higher than 20%	discount to next round per investment docs	Should not be above 20% without a good reason
11	Reserve matters	permission needed from investors to proceed with certain actions like hiring, spending more than $X amount, etc.	Never for an Angel round; try to avoid in a Seed round.
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13	anti-dilution	Should shares be sold or investment secured for equity from another party at a later date, the original investor's share in the business does not become diluted.	Not founder-friendly. Investor should get same terms as founders and other investors. Dilution isn't a bad thing. If the company is doing well your equity % goes down but your $ goes up - that's how the game works
14	tranched investment	refers to an investor making their funds available in stages as the business reaches specific milestones.	Not founder-friendly. Often milestones are unrealistic or simply don't apply by the time they kick in.
15	More than 1x liquidation preference	A multiple of the original investment amount is paid out BEFORE any common stock is redeemed.	Not founder-friendly
16	participating preferred	Participating preferred stock is preferred stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation.	Can mean founders/employees don't get anything in the event of a "successful" exit
17	Board seats for angels or for less than S$300k investment.	duh	not standard
18	Control over budget	Investor adds terms that maintain strict control over the startup's budget.	not standard.
19	Ratchets	if another VC later pays a lower price for shares in your start-up … the VC that bought shares earlier with the ‘ratchet’ protection gets a price adjustment to that lower price. Also IP ratchets and others.	No ratchets of any kind!
20	anything that takes CFO appointment and rights away from founders.	duh	No!
21	redemption rights	It lets investors require the company to repurchase their shares after a specified period of time. In essence, it’s a “put” right	No!
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24	Green	CAN
25	Yellow	TRY NOT
26	Red	DO NOT
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29	**My comments are meant for considering terms for Angel and Seed round capital raising in Southeast Asia. Rounds beyond that will have different standards.
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