New York, NY – May 5th, 2017
Tim Draper: “Private companies need to be tradeable when they get to be large enough, otherwise the whole ecosystem risks failure. Since Congress and the SEC have immersed IPO companies in regulations and high costs, the public markets don’t provide the liquidity they used to for growth companies. And automating the cap table just makes sense. With TATS, we are leading a discussion to move towards more liquidity for investors and more transparency for founders.”
What is the TATS term sheet?
We’ve partnered with Draper Associates to create a new term sheet that allows startups to be eventually tradeable even if they’re not public, and automated so people can easily manage their private shares. We’re calling it the TATS, or Tradable, Automated Term Sheet. It can be an addendum to any Series Seed term sheet.
The idea for this is allowing investors to achieve liquidity faster. A company like Uber might be valued at a massive amount of money, but investors aren’t making any money until the company goes public or another companies acquires them. Early investors like friends and family might not want to wait for the IPO.
The TATS allows investors to achieve liquidity when the company reaches a $100m valuation, or after a certain amount of years. It’s also a step toward a private stock sharing platform, where investors can easily manage and trade their private shares.
How is this different from similar products out there?
The TATS is an entirely new set of investor documents. It’s in the same vein as Y Combinator’s SAFE note and 500 Startups KISS, but this is the first of its kind that allows shares to be traded before a company goes public. Furthermore, while SAFE and KISS are both convertible debt, which actually disadvantages startups, as they keep raising debt and don’t experience dilution. Startups assume by default that they have to use convertible notes (like Fred Wilson just wrote about), but we don’t believe that to be the case. TATS is an equity raise, so investors will be able to know what the valuation of the company is up front, and there’s no interest tied to the funding.
Ultimately, the TATS benefits both startups and investors by allowing for earlier liquidity and more access to funding for startups. It’s good for investors and good for founders.
The other key part is the automation and management of private shares. LawTrades is moving toward products like eShares and EquityZen, which allow for cap table management, meaning you can manage all of your equity in one place.
Who will have access to the TATS?
We’ve made the documents privately available for download, and we’ve already seen a good amount of VCs, investors, and large companies looking at them. It has been reviewed by top Silicon Valley investors and attorneys, and is already being used by different VCs, including Draper Associates, which uses it for all their seed rounds.
LawTrades is creating a better legal experience. We’re an online message-based platform that allows anyone to seamlessly find, hire, and work with the best lawyers. Our vision is to create a world with ubiquitous access to quality legal services at affordable prices.
It starts with a unique solution to a complex problem–send a message to get anything legal done, whenever you want. Incorporate, review contracts, protect IP, and more. A smart project management system ensures 99% of our projects have been completed on time, on budget, and issue-free.
LawTrades also empowers attorneys to become independent and provides the tools to virtually eliminate admin and overhead expenditures, so lawyers can drastically increase their productivity and pass savings onto clients.
And we’re just getting started. LawTrades fundamentally changes the way we acquire and think about legal services. It’s an elegant and minimalistic, yet powerful, interface that sits between a complex set of legal services.