For New Zealand seed investors complaining about unfriendly, complex investment documents, the future will be a lot simpler.
Technology law firm, Simmonds Stewart, has published two new seed investor documents in their library of free legal templates:
• Kiwi keep investment simple security (KiwiKISS)
• Kiwi startups agreement for future equity (KiwiSAFE)
KiwiKISS and KiwiSAFE are based on similar documents by Silicon Valley startup pioneers, 500 Startups and Y Combinator. The New Zealand versions are faithful to their US counterparts, which are widely accepted across the country as well as in Southeast Asia.
Corporate technology lawyer, Lee Bagshaw, who works at Simmonds Stewart and who has extensive experience advising about venture capital financing in Southeast Asia, stressed New Zealand’s need for simplified seed investing documents.
“In Singapore, where there have been a multitude of seed investments executed in the last 3 years, the Y Combinator SAFE and 500 Startups KISS are commonly adapted for use locally,” he said. “The familiarity to local and global investors of the terms set out in these documents creates significant efficiencies on deal execution.”
“As a comparable common law jurisdiction, NZ could benefit in the same way if investors and companies are willing to embrace these more practical approaches.”
Bagshaw warned New Zealand is out of sync with global venture capital trends, with local seed investments involving documentation running up to 50 pages. This complexity is rarely seen in the US or other tech hubs unless a company was commencing a larger “Series A” financing round.
Using the KiwiKISS or KiwiSAFE formats however, documentation typically involves a 10-page agreement using internationally standard terms.
The benefits for start-ups are that the simplified documents mean fewer terms to negotiate on and more freedom for the future options of the company. Start-up founders can then spend more time and money developing their business.
As for investors, there will be no more painful arguments about start-up validations – a situation which is all too common in the existing equity investment model.
Andrew Simmonds, managing partner of Simmonds Stewart, said his firm was driven by a need to boost New Zealand’s early stage tech sector.
“The success of early stage companies is dependant not just on the availability of capital but also on the ability to execute deals efficiently,” he said.
“We welcome the opportunity to discuss how these documents can be used by companies and investors to replicate the success they have had in the US and in other tech hubs.”