# Fundraising Legal Compliance

> SKILL 72: Fundraising Legal Compliance

- Skill: `nickgallick/fundraising-legal-compliance` (Agent Skill)
- Install (CLI): `npx skillmds@latest add nickgallick/fundraising-legal-compliance`
- Raw SKILL.md: https://api.skillmd.com/api/skills/nickgallick/fundraising-legal-compliance/raw
- Safety review: pending (external: skill-scanner PASS, skillspector PASS)
- Works with: Claude Code, Claude.ai, OpenAI Codex
- Category: Coding & Dev Tools
- Author: nickgallick (https://skillmd.com/u/nickgallick)
- Updated: 2026-09-21
- Page: https://skillmd.com/skills/nickgallick/fundraising-legal-compliance

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# SKILL 72: Fundraising Legal Compliance

## Purpose
Raise money legally at every stage — from friends and family through Series A. Know what filings are required, what you can and cannot say, and Iowa-specific requirements.

## Friends & Family ($50K–$250K) — SAFEs

### Legal Structure
- **Reg D, Rule 506(b)**: unlimited raise from accredited investors + up to 35 sophisticated non-accredited investors
- **No general solicitation**: cannot advertise the round publicly, tweet "we're raising," email strangers
- **Instrument**: SAFE (Simple Agreement for Future Equity) — Y Combinator standard (free at ycombinator.com/documents)
  - Post-money SAFE: defines ownership at conversion more clearly than pre-money
  - **Valuation cap**: maximum valuation at which SAFE converts to equity (e.g., $5M cap = SAFE converts at $5M valuation regardless of actual round price)
  - **Discount**: percentage discount to next round price (typically 20%)
  - **MFN clause**: if a better SAFE is issued later, earlier investors get the same terms

### Required Filings
| Filing | Agency | Deadline | Cost |
|--------|--------|----------|------|
| Form D | SEC (EDGAR) | Within 15 days of first sale | Free |
| Form D Notice | Iowa Insurance Division (Securities Bureau) | Concurrent with SEC filing | $0–$500 depending on amount |
| Blue sky filings | Each state where non-accredited investors reside | Before or concurrent with sales | Varies by state |

### Iowa Specific (Iowa Code Chapter 502)
- **Iowa Uniform Securities Act**: Iowa securities law applies to Iowa residents
- **Iowa Insurance Division**: accepts federal Form D as notice filing; no separate Iowa registration required for Reg D 506(b)
- **Iowa Crowdfunding Act (§502.202B)**: intrastate alternative
  - Iowa-based company can raise up to $1M from Iowa residents
  - Investors invest up to $5,000 each (or 10% of income/net worth, whichever is greater)
  - File notice with Iowa Insurance Division
  - Useful for community-based fundraise from Iowa supporters

### Investor Documents Package
- Completed SAFE agreement (signed by both parties)
- Investor questionnaire (confirms accredited status)
- Pitch deck (if provided — must not contain false statements or unsubstantiated claims)
- Company summary/executive summary

## Seed Round ($500K–$2M)

### Additional Considerations
- **Convertible notes** (alternative to SAFE): debt instrument, 5% interest, 18–24 month maturity, 20% discount, valuation cap
  - Difference from SAFE: convertible notes are debt; SAFEs are equity-like instruments
  - SAFEs preferred for simplicity; convertible notes useful when investors want debt protections
- **Lead investor**: one investor negotiates terms, others follow on same terms
- **Due diligence trigger**: investors will request corporate documents, cap table, IP assignments, financial projections, regulatory analysis
- **Pre-raise legal housekeeping**: entity formed, all IP assigned, agreements signed, cap table clean — do this BEFORE investor conversations

### Form D Amendment
- If raising multiple tranches: amend Form D for each material update (new investors, amount changes)

## Series A ($2M–$10M)

### Structure
- **Priced round**: company formally valued; investors buy preferred stock at set price per share
- **Term sheet**: non-binding summary (valuation, board seats, liquidation preference, anti-dilution, pro-rata rights)
- **Preferred stock rights**: liquidation preference, anti-dilution, information rights, protective provisions, board seat(s)

### Key Terms to Negotiate
- **Liquidation preference**: 1x non-participating is standard (investors get money back first OR convert to common — not both)
- **Anti-dilution**: broad-based weighted average is standard (better for founder than ratchet-based)
- **Board seats**: 2 founders + 1 investor at Series A. Do NOT give majority to investors in Series A.
- **Pro-rata rights**: right to participate in future rounds to maintain ownership. Limit this.
- **Legal fee cap**: company pays investor legal fees, capped at $25–50K. Negotiate hard on this.

### Closing Timeline
- Term sheet → signed: 1 week
- Due diligence: 2–4 weeks
- Definitive documents: 2–3 weeks
- Closing: 4–8 weeks total from term sheet

## Crypto-Specific Fundraising

### SAFT (Simple Agreement for Future Tokens)
- Investor buys right to receive tokens at Token Generation Event (TGE)
- The SAFT itself IS a security (investment contract under Howey)
- Sell only to accredited investors under Reg D 506(b)
- Requires: legal opinion that the eventual token is not a security (or will be registered)
- a16z alternative: SAFE + token warrant (separate documents for equity and token rights)

### Token Warrant
- Right to purchase tokens at future date at specified price
- Typically attached to equity SAFE/round as additional sweetener for early investors
- Specify: token allocation, pricing method, vesting schedule, lockup period (12–24 months post-TGE typical)

### Standard Token Allocation
| Category | % | Vesting |
|---------|---|---------|
| Team/founders | 15–20% | 4-year, 1-year cliff |
| Investors | 15–25% | 12–24 month lockup, monthly vest after |
| Community/ecosystem | 25–40% | Airdrops, rewards, grants |
| Treasury | 15–25% | DAO-governed |
| Advisors | 2–5% | 2-year vesting |

## Accredited Investor Verification
- **506(b)**: self-certification is sufficient (investor checks a box confirming accredited status)
- **506(c)**: requires third-party verification (VerifyInvestor, attorney letter, CPA letter)
- **Income test**: $200K individual / $300K joint for prior 2 years, expected to continue
- **Net worth test**: $1M+ excluding primary residence
- **Professional license**: Series 7, 65, or 82

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*This is legal research and intelligence, not legal advice. Consult qualified legal counsel before taking action.*