KISS Docs. 

Use the KISS 500 Startups ("Keep It Simple Security") Convertible Debt or Equity Financing documents to close your next round with a LawTrades attorney.

Overview

The KISS 500 Startups (Keep It Simple Security) docs are short and sweet funding documents released by 500 Startups after feedback from many early-stage investors. They are designed to be flexible, simple, and balanced from both the standpoint of the company and investor. There are two types of KISS agreements: a debt version and an equity version.

The debt version accrues interest (5%), has a maturity date of 18 months, and automatically converts to preferred stock if the company raises $1 million in the next qualified round. KISS equity securities similarly have an 18-month maturity date and an automatic conversion into equity at the next round of financing if $1 million is raised. KISS equity securities do not have an interest rate though, which makes them attractive to founders. Although a KISS is meant to be clear and easy to understand, it’s still in a company or investor’s best interest to have an attorney check things over before completing the deal.

Benefits of legal advice

Confirm best form of funding 

There are other attractive options for companies - like SAFE documents and convertible notes- and a lawyer can assess if those sources suit your business better.

Assurance you’re doing it right 

Although a KISS 500 Startups is meant to be simplistic, there are still mistakes to make. Also, it’s nice hearing from an attorney that the proposed terms of the agreement are fair and enforceable.

You have an attorney to turn to 

There’s a good chance you’re going to like your attorney from LawTrades and want to keep using him / her. By setting up that relationship for a KISS, you have a legal expert to turn to when in need.

FAQ

Do I need an attorney to set up a KISS?

Not necessarily but each round of funding is so important that it’s in your best interest to have an attorney, at the very least, review the KISS. The terms of any deal should be based on your specific circumstances so speaking with an attorney to assess the right deal is advisable. Also, you should consult with an attorney before relying on any legal documents, especially if you’re unable to understand any of the terms.

What’s the difference between convertible notes and KISS documents?

The debt version of a KISS is essentially a convertible note without all of the formalities and hassles. KISS also has documentation for doing a traditional equity deal rather than a convertible note.

Should I go with a KISS or a SAFE document?

It depends on your situation. They’re both really helpful for businesses and investors looking for a simple agreement with clear terms. Generally, SAFE agreements are thought of as most founder friendly as they lack even the most basic forms of protection associated with convertible notes, namely an interest rate or a maturity date. On the other hand, terms within KISS agreements favor investors with a 5% interest rate, 18 month maturity date, information rights, and an automatic conversion of preferred stock if the company reaches $1 million in funding at the next round.

What is a “Most Favored Nation” clause?

It’s a provision within a KISS that states if the company ends up issuing better securities in the future, KISS investors can convert to those terms instead.

What are some other features of a KISS?

Under a KISS, if the company is sold prior to conversion to equity, the investor can opt to receive 2x the original investment or convert at the valuation cap. Also, a KISS provides investors who invest more than $50,000 with additional rights such as information rights and participation rights. Another feature of a KISS is that the investor can transfer its KISS to anyone at anytime.
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