Series A Legal Stack
for a Web3
Infrastructure
Startup
Drafted SAFE notes, term sheet negotiation, founder agreements, and IP assignment documentation - enabling a $9M Series A from top-tier Web3 VCs, conducted entirely through online legal consulting.
In early 2024, a four-founder Web3 infrastructure startup - building a decentralized node orchestration layer for EVM-compatible chains - retained YourTechLegal to build their complete Series A legal stack from the ground up. The engagement was conducted entirely through online legal consulting: asynchronous document workflows, secure virtual data rooms, and structured video-conference negotiation sessions across three time zones.
The founders had already secured verbal commitments from three prominent Web3-native venture funds - but lacked the foundational legal infrastructure to close the round. No formal entity had been established. Founder equity had never been documented. IP created over eighteen months of development sat in a legal grey zone. The term sheet on the table was investor-drafted and contained several provisions materially adverse to the founders' long-term interests.
YourTechLegal's deal team intervened across every layer of the legal stack simultaneously - company formation, SAFE conversion mechanics, term sheet negotiation, founder agreement structuring, and IP chain-of-title remediation - delivering a fully executable closing package within eleven weeks. The $9M Series A closed on schedule with all three investors.
$9M
Raised at Close
11
Weeks to Close
0
In-Person Meetings
18+
Months of IP Remediated
Key Finding: Web3 infrastructure startups approaching a Series A with undocumented IP, informal equity arrangements, and no formal entity risk losing 30–60 days of negotiating leverage - and potentially the round itself - once investors commence legal due diligence. Legal stack preparation is not post-term-sheet work. It begins on Day 1.
02 - Client Profile
Client Profile
Our client - referred to as Orbis Labs (name anonymised at client request) - was a four-person founding team building a decentralized infrastructure protocol enabling permissionless deployment, monitoring, and failover of validator nodes across EVM-compatible blockchain networks. Their core product addressed a significant operational pain point for Layer-2 sequencers, cross-chain bridges, and DeFi protocols requiring high-availability node infrastructure.
By the time they engaged YourTechLegal, Orbis Labs had achieved meaningful technical milestones: a functioning testnet, twelve integration partnerships with L2 protocols, and a growing developer community of 4,000+ on their Discord. Three Web3-native venture capital funds - two based in the United States and one in the Cayman Islands - had expressed firm investment intent subject to satisfactory legal due diligence.
The critical problem: the company existed as nothing more than an informal collaboration between four developers. There was no legal entity, no documented equity arrangement, no IP assignment, and no formal agreement among the founders on governance, vesting, or founder departure mechanics. Investor due diligence would expose every one of these gaps immediately.
Client Overview
CompanyOrbis Labs (anon.)
ProductNode Orchestration Protocol
StagePre-Series A → Series A
Founders4
Team Size11 (incl. contractors)
Testnet LiveYes - 12 integrations
Community4,000+ Discord members
Prior Funding$420K angel (undocumented)
Entity at EngagementNone
03 - The Challenge
The Challenge
Web3 infrastructure companies face a distinctive legal complexity at the Series A stage that differs materially from traditional SaaS or fintech fundraises. The open-source development model, cross-jurisdictional founding teams, token economics roadmaps, and decentralized governance ambitions create legal surface area that standard startup legal templates - designed for a Delaware SaaS business raising from Sand Hill Road - do not address.
01
No Legal Entity - Full Exposure
Orbis Labs had operated for eighteen months without incorporation. All contracts, grant agreements, and integration partnerships were signed personally by individual founders - creating unlimited personal liability for all four. Any investor conducting basic due diligence would immediately require this resolved before committing capital.
Risk Level: Critical
02
Undocumented Equity & Prior Angel Capital
$420,000 in angel funding had been received from two individuals via informal bank transfer and a handshake agreement. No instrument - convertible note, SAFE, or equity - had been issued. Absent documentation, the company's capitalization table was legally unenforceable, and the angels' rights were undefined.
Risk Level: Critical
03
IP Ownership Ambiguity
Eighteen months of core protocol development had been conducted by four founders, three of whom resided in different countries (US, UK, Singapore). No IP assignment agreements existed. Two founders had moonlighted on Orbis while employed by other companies - creating potential employer IP-claim risk under the employment agreements of their day jobs.
Risk Level: Critical
04
Investor-Drafted Term Sheet - Adverse Provisions
The lead investor's term sheet contained a 2x participating preferred liquidation preference, board control provisions giving investors veto rights over all material decisions above $50K, full-ratchet anti-dilution, and a drag-along threshold requiring only 50% of investor shares to force a sale. Each provision was standard from the investor's perspective - and highly disadvantageous to the founders.
Risk Level: Significant
05
No Founder Agreements or Vesting
With no founder agreements in place, there was no vesting schedule, no non-compete or non-solicitation framework, no IP-to-company assignment, and no defined process for handling a founder departure. Investors universally require these documents before committing Series A capital - and they provide the founding team protection too.
Risk Level: Significant
06
Token Roadmap - Pre-emptive Legal Structuring
All three investors were aware that Orbis Labs had a token launch in its medium-term roadmap. The term sheet needed to address token allocation, investor token rights, and the governance mechanics for any future DAO transition - creating an additional layer of web3-specific negotiation that general startup lawyers are not equipped to handle.
Risk Level: Moderate
04 - The Legal Stack
The Complete Legal Stack
Rather than addressing each issue in sequence, YourTechLegal deployed a parallel workstream model - four concurrent document tracks running simultaneously with daily cross-track synchronisation. This approach compressed what would typically be a 20–24 week legal process into an 11-week close.
Term Sheet NegotiationSeries A Preferred Stock Purchase AgreementInvestor Rights AgreementToken Side Letter
The stack reflects a deliberate sequencing logic: each lower layer must be resolved before the layer above it can be properly documented. An investor rights agreement drafted before IP has been properly assigned to the company is built on structurally unstable ground - and experienced VC counsel will identify this immediately during diligence.
05 - SAFE Note Drafting
SAFE Note Drafting & Angel Documentation
The $420,000 in prior angel capital presented an immediate structural problem: two individuals had provided funding - in good faith - with no written instrument. Retroactively documenting this capital required both legal precision and negotiation finesse, as any instrument issued now would crystallize the angels' rights, dilution mechanics, and conversion terms at the Series A.
Instrument Selection: Why Post-Money SAFE?
After analysing the angels' informal expectations and the Series A investors' preferences, YourTechLegal recommended YC post-money SAFE notes as the retroactive instrument. The post-money SAFE's dilution mechanics - where the SAFE dilutes alongside the option pool before the Series A, not after - provided predictability for both angels and Series A investors on final ownership percentages.
Instrument OptionAngel OutcomeSeries A Investor OutcomeSelected
Pre-Money SAFEUncertain dilution at priced roundComplex cap table modeling required
Post-Money SAFE (YC)Defined ownership % before roundClean, standard - widely accepted
Selected
Convertible NoteInterest accrual complicates conversionAdditional instrument to review in diligence
Retroactive Equity GrantTriggers 409A valuation requirementTax & securities law complications
Key SAFE Terms Negotiated
Valuation Cap
$12M post-money
Benchmarked against comparable Web3 infrastructure SAFEs at seed stage
Discount Rate
20%
Standard for angels who provided capital without a formal instrument
Pro-Rata Rights
Yes - on future rounds
Concession to angels in lieu of retroactive equity; negotiated cap at Series B
MFN Clause
Included
Angels protected if subsequent SAFEs issued on better terms prior to priced round
06 - Term Sheet Negotiation
Term Sheet Negotiation
The lead investor's initial term sheet was structured from a position of significant leverage - the founders had no legal counsel, no formal entity, and had already announced the round to their community. YourTechLegal's first strategic intervention was to stabilize the founders' negotiating position: incorporation was fast-tracked, basic legal infrastructure was established, and the term sheet response was delayed by ten days while the founders' legal foundation was put in place.
This delay was critical. Negotiating a term sheet without a company, a lawyer, or a cap table is negotiating blind. The ten-day pause - framed to investors as necessary for legal setup - shifted the power dynamic materially before a single term was discussed.
Practitioner Note: The shift from 2× participating to 1× non-participating preferred was the single most financially significant negotiation outcome. In a $50M exit scenario at this round's valuation, the difference between those two liquidation structures represents over $3.1M in additional proceeds to founders and common stockholders. Term sheet economics are compounding - every word matters.
07 - Founder Agreements
Founder Agreements & Equity Structuring
With four founders across three jurisdictions - one in the United States, one in the United Kingdom, one in Singapore, and one who had recently relocated to the UAE - the founder agreements required careful jurisdictional layering. Each agreement was governed by Delaware law (as the entity's state of incorporation), but each founder's individual obligations - particularly around IP and restrictive covenants - were complemented by jurisdiction-specific addenda to ensure local enforceability.
Founder Equity Distribution
Orbis Labs' four founders had never formally documented their equity split. Three founders were in rough agreement on approximate percentages; the fourth - who had joined six months later but contributed the most commercially valuable intellectual property - believed their contribution warranted a materially higher allocation. YourTechLegal facilitated a structured founder equity conversation using a contribution-weighted framework before any agreement was drafted.
Post-Incorporation Cap Table - Pre Series A
Founder A (CEO)
28%
Founder B (CTO / Core IP)
32%
Founder C (Protocol)
22%
Founder D (BD, later)
13%
Option Pool (ESOP)
5%
Angel SAFEs (converting): ~$420K at $12M post-money cap. Not reflected in pre-conversion table.
Vesting Schedule Architecture
Standard Vesting
4 years / 1-year cliff
Applied to all four founders. 25% vests at the 12-month cliff; remaining 75% vests monthly over 36 months.
Credit for Prior Service
6–18 months retroactive credit
Each founder received vesting credit for time already invested in Orbis Labs pre-incorporation. Ranges varied by start date. Critical founder retention mechanic.
Acceleration
Double-trigger on Change of Control
100% acceleration if (a) change of control occurs AND (b) founder is terminated without cause or resigns for good reason within 12 months.
Repurchase Rights
At original cost on unvested shares
Company retains right to repurchase unvested shares at original issuance price on a founder's departure - standard investor protection included at investor insistence.
08 - IP Assignment
IP Assignment & Chain of Title
Intellectual property chain of title is the single most common dealbreaker in Web3 infrastructure fundraises. Unlike a consumer app, where IP typically consists of copyrighted code in a single codebase, a node orchestration protocol involves multiple overlapping IP categories: core protocol architecture (trade secret + copyright), smart contract bytecode (copyright), developer tooling (copyright + trade secret), and potentially patent-eligible network coordination mechanisms.
Source Code (Copyright)
All original source code written by founders and contractors assigned to Orbis Labs via IP assignment agreements. Open-source licence audit conducted to identify any GPL or AGPL code in the dependency tree that could trigger copyleft obligations on proprietary components.
Smart Contracts (Bytecode + Source)
Node coordination smart contracts deployed on testnet were categorized, documented, and assigned. Governance token contracts (in development) were included in a forward-looking assignment clause covering all future work product.
Trade Secrets (Protocol Architecture)
The core orchestration algorithm - Orbis Labs' primary competitive advantage - was documented as a trade secret asset and included in the IP assignment. NDAs and confidentiality clauses within founder agreements reinforced the trade secret classification.
Prior Employer Risk - Remediated
Two founders had been employed by other technology companies during the initial development phase. YourTechLegal reviewed both founders' prior employment agreements, assessed the scope of each employer's IP ownership clauses under the applicable jurisdiction (California and UK), and provided written legal opinions confirming that Orbis Labs' core IP fell outside the scope of either employer's claim - a critical document for investor due diligence.
IP Audit Finding: The open-source dependency audit identified three libraries licensed under LGPL-2.1 and one under AGPL-3.0. The AGPL-licensed library - used in an internal tooling component - posed a theoretical copyleft risk to a proprietary module. YourTechLegal recommended and documented a clean architectural separation, eliminating the risk before investor diligence commenced.
09 - Online-Only Engagement
How the Entire Engagement Was Conducted Online
One of the defining characteristics of this engagement - and an increasingly common model for web3 legal consulting - was its entirely remote execution. With founders across four countries and investors in three time zones, a traditional in-person legal engagement model was neither practical nor necessary.
YourTechLegal's online legal consulting infrastructure enabled a rigorous, secure, and efficient engagement that matched or exceeded the quality of in-person work on every dimension that matters for a fundraise: document quality, negotiation effectiveness, and closing certainty.
Virtual Data Room
A structured VDR was established within 48 hours of instruction. Organised into investor-facing and counsel-only sections, with granular access controls and full audit logging. Investors could review due diligence materials in real-time as documents were completed.
Async Document Workflows
All drafts were circulated via tracked-changes markup with structured comment threads. Founders and investors could review and respond asynchronously - eliminating the bottleneck of scheduled review calls for routine document iterations.
Structured Negotiation Sessions
The four principal term sheet negotiation sessions were conducted as structured 90-minute video calls with pre-circulated positions papers. YourTechLegal counsel participated as active negotiators - not passive note-takers - achieving all eight major term modifications within four sessions.
Digital Closing & E-Signatures
All closing documents were executed electronically. YourTechLegal managed signature sequencing across four founders and three investor entities - coordinating legal effectiveness across Delaware corporate law and the applicable signature laws of all relevant jurisdictions.
Live Cap Table Modelling
A shared cap table model was maintained throughout the engagement, updated in real-time as SAFE terms were finalised, option pool mechanics were agreed, and Series A share counts were determined. Founders could see the precise dilution impact of every negotiated term as it was agreed.
Project Management & Milestone Tracking
A daily status report was circulated to the founding team covering open items, document status, investor query status, and critical path risks. The eleven-week close was achieved through disciplined project management - not by chance.
10 - Outcomes
Outcomes & Results
$9M
Series A Closed
Three Web3-native VC funds · Delaware C-Corp · All three investor tranches funded simultaneously at closing
11
Weeks Term Sheet → Close
vs. industry median of 18–22 weeks for comparable Web3 infrastructure raises at this stage
Delaware C-Corp formed and capitalized - clean entity with proper authorized share structure, option pool, and board governance in place before investor due diligence commenced.
$420K angel capital retroactively documented - YC post-money SAFEs executed by both angels within seven days of engagement. Zero disputes. Clean conversion at Series A close.
Seven of eight major term sheet provisions materially improved - including a shift from 2× participating to 1× non-participating preferred, and board composition flipped to founder-majority.
Full IP chain of title established - all four founders, three contractors, and all prior-development work product assigned to the company. Prior employer risk opinions issued. Open-source audit remediated.
Token side letter negotiated and executed - investor token rights defined, locked, and structured to avoid securities classification risk. Future DAO governance transition pathway preserved.
Double-trigger acceleration secured for all four founders - a protection point not in the original investor term sheet that required active negotiation to include, providing meaningful downside protection for founders in an acquisition scenario.
"
We went from four founders with a handshake to a fully documented, investor-ready company in eleven weeks - without a single in-person meeting. YourTechLegal handled everything: the entity, the IP, the negotiation, the close. Their understanding of Web3-specific deal terms is genuinely unmatched in the online legal consulting space.
- CEO, Orbis Labs · Series A, $9M · Web3 Infrastructure
11 - Key Takeaways
Key Takeaways for Web3 Founders Approaching a Series A
01
Start Your Legal Stack Before the Term Sheet
Entity formation, founder agreements, and IP assignment are not investor-request tasks. They are Day 1 tasks for any serious company. Arriving at a term sheet without these in place hands negotiating power to the investor.
02
Investor-Drafted Term Sheets Are Not Neutral Documents
Every term sheet drafted by investor counsel optimizes for investor outcomes. This is not bad faith - it is normal. Founders need their own web3 legal consulting counsel who understands both the standard positions and where there is room to push.
03
Liquidation Preference is the Most Consequential Economic Term
Founders routinely focus on valuation and dilution while accepting adverse liquidation preference structures. A 2× participating preferred at a $9M round can represent millions of dollars of founder value destroyed in a median exit scenario.
04
IP Chain of Title is a Dealbreaker Risk - Not a Formality
Investors will not close on a Web3 infrastructure deal with unresolved IP ownership. Prior employer risk, contractor IP, and open-source licence compliance must all be affirmatively resolved - not assumed. Legal opinions matter here.
05
Token Rights Belong in the Term Sheet, Not a Side Conversation
If your protocol has a token roadmap, investor token rights need to be addressed in the primary transaction documents - not deferred to a post-closing side letter. Deferral creates ambiguity that investors will eventually resolve in their favour.
06
Online Legal Consulting Works - If Done Properly
The Orbis Labs engagement is evidence that a complete Series A legal stack - entity, IP, SAFE, term sheet, founder agreements, closing - can be executed entirely remotely without compromising quality, negotiating effectiveness, or closing certainty.
Web3 Startup Legal Specialists
Raising a Web3 Round? Build Your Legal Stack First.
From entity formation and SAFE documentation to term sheet negotiation and IP chain of title - YourTechLegal handles the complete legal infrastructure for Web3 startup fundraises, entirely through online legal consulting.
SAFE Note Drafting
Term Sheet Negotiation
Founder Agreements
IP Assignment & Audit
Token Side Letters
Entity Formation
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