More on Adoption Rates
To follow up on comments on my post of a couple days ago and based solely upon our published numbers (which does not include all the transaction that we track), 77% of Series A investments tracked by us used the NVCA forms and 22% did not. If I add unpublished data the adoption rate is slightly higher. With respect to Series B and later stage investmens based solely upon our published numbers, 58% of transactions used the NVCA forms and 42% did not. Again, if I add unpublished data the adoption rate becomes slightly higher.
The increase from 58% of Series B and later stage transactions to 77% of Series A transactions suggests that, at least in New England, the NVCA forms are gaining increasing acceptance.
Comments (1)
Read through and enter the discussion by using the form at the endSarah Reed - November 19, 2009 2:01 PM
The adoption rates tell only half the story: it was never the objective of the group that drafted these documents that they become a Procrustean bed (I wait years for the right opportunity to use that phrase!). Rather, our principal objectives were:
1) Let's create a set of reference docs, available to all on the web, that will explain everything in a plain and transparent manner. No one should "win points" on a deal due to the other side's ignorance or lack of sophistication. There is no way of capturing how often the docs are used for this purpose, but I know the NVCA web pages gets thousands of hits a month, and it is their most viewed web page.
2) Let's debug the docs -- prior to our efforts, there were a bunch of things in typical VC financings docs that did not work and/or were not even close to comprehensible by anyone other than a seasoned VC lawyer and/or were inconsistent with or did not reflect current law. We identified and outed those bugs, and even in deals where NVCA docs are not used, they are at least free of these bugs.
Example: NO ONE drafts charter provisions anymore that permit investors to get "Benchmarked" -- i.e., washed out against their will because the magic words "including by way of merger or reorganization" are missing from the intro to the protective provisions.
EXAMPLE: When was the last time you saw a "No Impairment" provision in a charter?
3) And while we are at it, let's not just debug, let's go further and have all of the experts share their cool "features" on an open-source basis.
EXAMPLE: My own contribution, as someone who is GC at a VC firm and hence understands a typical VC fund org chart, was to point out that the typical/historical definition of "affiliate" actually did not work for most VC funds, and now you always see the concept of "managed by the same management company" in the "Affiliate" definition.
4) Let's free up time for attorneys to find new hobbies (we are generally a drab lot, and would benefit from more avocations)by turning the Registration Rights Agreement into something that takes only a few (albeit still mind-numbing) minutes to skim through.