Anatomy of a priced round

A post-money SAFE has approximately 3,500 words. The five core NVCA documents for a Series A have approximately 78,000 words in their main text. What do all those words do? This lesson shows what a priced round sells, which document holds each promise, and what the round costs in money and time.

What a priced round sells

In a priced round, the company sells new shares at a fixed price. No shareholder sells old shares. The company issues new shares, the primary shares, and the cash goes to the company. The price comes from the pre-money valuation in one division:

Price per share
  = Pre-money valuation
    ÷ Pre-money fully diluted shares
  = $12,000,000 ÷ 10,000,000
  = $1.20

An investor who puts in $3M at $1.20 gets 2,500,000 new shares. After the round, the company has 12,500,000 shares, and the investor owns 20%. As a check, 12,500,000 × $1.20 = $15M, which is the post-money valuation. The lesson on price per share teaches this division in detail.

Your share count stays the same, but your percentage decreases. If you own 4,000,000 of 10,000,000 shares before the round, you own 4,000,000 of 12,500,000 after it. That is 32%, not 40%.

The company must have the legal authority to issue the new shares. Thus the company amends its charter, the Amended and Restated Certificate of Incorporation, to make a new class of preferred stock. The board and the stockholders approve the charter. Then the company files it with the state, usually Delaware, on or before the closing.

Preferred stock: what the investors buy

Founders and employees hold common stock. Investors in a priced round buy preferred stock, which has more rights. Each priced round makes a new series: Series Seed, Series A, Series B, and so on. These are the most important rights:

Liquidation preference. If a buyer purchases the company, the preferred holders get their money back before the common holders.
Conversion. Preferred stock can convert into common stock, usually one share for one share. In the NVCA model charter, it converts automatically at an underwritten IPO that meets the terms in the charter. It also converts when the required preferred holders vote for it.
Anti-dilution protection. If a subsequent round sells shares at a lower price, the conversion price of the preferred stock decreases.
Protective provisions. Preferred holders can stop some company actions, for example a sale of the company or a new senior class of stock.
Board seats, information rights, and pro rata rights. The lead investor frequently gets a board seat. Investors get financial reports, the information rights. They also get the right to buy into future rounds, the pro rata right.

These rights are why investors pay much more for each share than the founders paid. The founders frequently paid a fraction of a cent for each share. The Series A investors pay the full price, and in exchange they get the preferences.

Predict first

An investor puts $14M into a company for 20%, with a 1x non-participating preference. A buyer pays $50M for the company. How much does the investor get?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

The standard liquidation preference is “1x non-participating”. The investor gets the larger of its money back or its percentage of the sale, not the two. With one round, the investor converts only when the sale price is more than the post-money valuation of that round. The term sheets module teaches the other forms in liquidation preferences.

The documents of a priced round

A US priced round usually uses the model documents of the National Venture Capital Association, the NVCA model documents, or the shorter Series Seed documents. Each NVCA document has one job:

Document	What it does
Term sheet	A short summary of the deal. Most of it is not binding.
Stock Purchase Agreement (SPA)	Records the purchase: the shares, the price, the closing, and the company’s statements of fact.
Restated charter	Makes the preferred stock and gives its rights: preference, conversion, anti-dilution, votes, and protective provisions.
Investors’ Rights Agreement (IRA)	Gives information rights, registration rights, and the right to buy into future rounds.
Voting Agreement	Says who names each board seat. It also holds the drag-along.
ROFR and Co-Sale Agreement	Lets the company and the investors buy a founder’s shares first, or sell some of their own shares in the same sale.
Management Rights Letter	Gives a fund the right to consult with management, for US pension law.

Four terms in the table are new:

The company’s statements of fact in the SPA are the representations and warranties. A disclosure schedule lists the exceptions.
Registration rights let investors make the company register their shares for public sale after an IPO.
The drag-along is a promise of the stockholders to vote for a sale that the board and the investors approve.
A fund uses the management rights letter to be a “venture capital operating company” under ERISA, the US pension law. Founders usually sign it with no changes.

Two clauses of the term sheet are binding: the no-shop and confidentiality. The NVCA model term sheet keeps them binding “whether or not the financing is consummated”. An NVCA footnote also says that some courts found a duty to negotiate in good faith, even with a “non-binding” term sheet.

Sort the clauses in the next exercise into their documents. At the end, you get a map of the full deal.

Sort the clauses · 1 of 14

Which document holds this term?

A priced round puts each promise in a specific document. Select the document for each clause.

The liquidation preference of the Series A Preferred

Series Seed or NVCA documents

The Series Seed documents are a free, open-source, shorter set for seed rounds. Lawyers and investors wrote them together, and Ted Wang, then a lawyer at Fenwick & West, led the work. The core set has three documents: a term sheet, a Preferred Stock Investment Agreement, and a Restated Certificate.

The investment agreement puts many investor rights into one document. Series Seed also does not include two NVCA terms: price-based anti-dilution and registration rights. In exchange, the seed investors get the same rights as the next series of preferred stock.

	Series Seed	NVCA
Core documents	3	5, plus the term sheet and the management rights letter
Words in the main text	Approximately 18,000	Approximately 78,000, or 107,000 with the drafting notes
Price-based anti-dilution	No	Yes
Registration rights	No, the next round sets them	Yes
Investor counsel fee	A flat $10,000 in the form	A cap that the parties negotiate

The word counts come from the downloaded forms in November 2026. The NVCA updated its charter, SPA, and IRA in October 2025. It updated its ROFR and Co-Sale Agreement in April 2026, and its Voting Agreement in June 2026.

Which set do you use? The lawyer Kyle Westaway gives one rule: “Choose by lead investor, not by round size.” He also writes: “A lead who wants a board seat and full investor rights will want NVCA.” But “many seed funds are happy with Series Seed” for rounds of $2M to $5M.

What a priced round costs

The company pays its own lawyers. In a US priced round, the company usually also pays the lead investor’s lawyers, up to a cap in the term sheet. A SAFE costs very little. A Series A costs tens of thousands of dollars.

Work it out

Northwind raises a $2M priced seed on Series Seed documents. Its own lawyers charge $30K, and it pays the flat $10K fee for the investor's lawyers. What percentage of the round goes to legal fees?

From term sheet to money in the bank

A priced round continues for weeks, and some dates are legal deadlines. This worked example uses invented dates for Northwind’s Series A.

Worked example · step 1 of 7

Northwind's Series A, from signature to wire

1
Sign the term sheet
The lead investor sends a term sheet, and Northwind signs it. The no-shop and confidentiality clauses are binding from this day. For 60 days, Northwind does not look for other investors.
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Day 0    Term sheet signed
Day 60   No-shop ends
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All closings of one round use one price. If the company wants a higher price, that is a new round. Shares from an additional closing dilute all holders, the converted SAFE holders too.

A tranched round is different. In a tranched round, investors agree to the full sum at the start but pay in parts, usually after milestones. The NVCA added tranche terms in October 2025. In Q2 2026, 29.6% of the 27 life sciences deals in Cooley’s report had tranches.

Quiz · question 1 of 6

Test what you learned

A Series A has a $20M pre-money valuation and $5M of new money. The company has 8,000,000 fully diluted shares and no pool change. What is the price per share?

In this lesson you will learn