Series A is Closed. Now what?
By Kevin Vela
A lot of founders think that the round is closed once the wire hits, but in reality, you’re only 80%-90% there. There are a number of post-funding boxes to check off and the purpose of this blog is to give founders a starting point for next steps after completing a Series A financing.
- Make sure the Company (or more likely, your legal counsel) files applicable securities exemptions. Typically, both federal and state filings need to be completed within 15 days of the initial closing (or as applicable on a state-by-state basis).
- Order a new 409A valuation. 409A valuations, which set the exercise price for common stock, should be updated no less frequently than once per year, or after a material financing event, whichever is sooner. These take two to four weeks and must be done prior to issuing any new stock options.
- Issue promised stock options (once you have the new 409A report) and enter into employment agreements with any proposed hires. Most Companies at a Series A stage have a number of recent hires or promised hires, with stock option grants, that need to be finalized soon after a Series A financing.
- If not done already, finalize elections to the board, and then set your next board meeting, and establish a cadence for board meetings – usually quarterly or every other month. If you want to read more about this – check out our blog “Hosting a Board Meeting? Here’s how to do it well.”
- Speaking of finalizing elections to the board, make sure you get your board indemnification agreements executed.
- Finalize any post-closing covenants in your Series A transaction documents. These typically include securing directors and officers or other insurance and any post-closing covenants from the Stock Purchase Agreement.
- Make sure you get a closing binder from your attorney. It’s critical to get all of the related Series A documents in one place for distribution to investors, and for record-keeping purposes.