What Is a Kiss Agreement

KISS agreements provide a simple standard open source model for investing in early-stage companies. The KISS deals were formed in 2014 by 500 startups, a venture capital firm. Silicon Valley lawyers and investors collaborated on the format to streamline seed funding. (You might even call it a «hack» of the investor financing system.) Now that you know clearly what KISS convertible debentures are, you can now decide to use them for the initial financing of your business. However, keep in mind that it`s important to track all of this in your cap chart. In fact, KISS convertibles can affect your company`s capitalization table, and it`s important to keep an eye on them to model different dilution scenarios. I have been practicing law in a foreign jurisdiction for over 11 years and in Texas for over a year. I am a licensed attorney in Texas. Areas of activity include company law: establishment of business units, preparation of enterprise contracts, statutes and commercial contracts; Commercial law: business litigation, letters of claim, declarations of cessation and abstention, relations with insurance companies, negotiations, dispute resolution, commercial real estate and commercial litigation Litigation: commercial litigation, personal injury, civil rights, cross-border cases, maritime affairs, writing briefs, application practice, legal research, commercial criminal law. Don`t skip a lawyer exam. Instead of grabbing an open source agreement and handing it over to an interested investor, you always want a professional in your corner who is familiar with funding and can review the document and explain the possible outcomes. It has similarities with the SAFE instrument, whose objective remains the same: to enable start-ups to obtain financing in a short period of time and at low cost, avoiding the long and long negotiation period that normally precedes an investor`s grant agreement.

Before considering a KISS agreement, it is important to understand what a convertible bond is. Here`s how it works. They eliminate the need to negotiate terms with investors and then pay high legal fees. Unlike traditional equity financing methods, KISS agreements are identical in several respects. It is said that SAFE is safe because there are no explosive clauses that can destroy the company. The terms are so tight that Y Combinator had to enter into four separate contracts to avoid complexity: these four types of SAFE are extremely simplified agreements and they favour the company to the detriment of the investor. The KISS 500 Startups convertible bond, also known as «Keep It Simple Security», is an agreement between an investor and the company. The investor invests money in the company and in return receives the right to buy shares in a next round if this happens. You may want to think of a KISS as a hybrid: it aims to maintain the simplicity and ease of use of a SAFE, but with some of the investor protections found in convertible bonds. Every business is different and you want to make sure you don`t promise anything that leads to undesirable results. For example, you don`t want your KISS deal to lead you down a path where investors get more control than expected. SAFE, also known as the Simple Agreement for Future Equity, is a convertible security that promises to convert the investor into shares in the future.

Unlike convertible bonds, SAFE notes tend to have fewer faces, fewer clauses and are easier to understand. In addition, SAFE notes are not technically debts because they have no maturity date or interest. If you take a closer look at KISS agreements, these protections add complexity. Some examples: We will talk about it in the following table: In your search for investors, speed and ease seem to be an ideal way to raise capital. That`s where a KISS deal comes in. A Keep It Simple Security (KISS) device is a simplified investment structure similar to a convertible bond that brings capital into your business much faster than more conventional methods. The next maturity of the convertible bond is the valuation ceiling. It represents an «upper limit» of valuation for the convertible investor in the next round of financing that takes place in the company. Let`s take an example to better explain this. If a convertible instrument has a valuation cap of $3 million and the startup has a funding round in which it sells the Series A shares at a price of $5 million, the convertible paper will be converted to Series A shares at a valuation of $3 million. If a conversion instrument has both a discount and valuation limit, the investor will generally convert at the price that gives the lowest conversion price. Investors appreciate these agreements because they bring consistency and simplicity to the process while offering various protections to mitigate risk.

If KISS agreements are right for your business, an equity management partner can help you find resources to ensure you make the best decisions while ensuring your business stays on track and meets its obligations to investors.