This was certainly true in the past from my understanding of the history before my time.
Most terms are pretty standard now. And most of them have good reasons for existing — usually to align the founders and investors. Just because a term is complex and could benefit the investor doesn’t mean it’s meant to mislead.
But, I’m interested in some examples that might shake my opinion about up!
I wouldn't say the complications themselves are intentional. But take a look at a typical Series A. There are 5 core documents. Dozens and dozens of pages of legalese. I'm a lawyer and understand them. But most founders don't.
What's interesting is that virtually every word in those docs is there to protect the investors, most at the expense of the founders and other existing shareholders.
Ok, so maybe that sounds obvious. Why would it be otherwise?
Well, take a look at the initial docs when a company is founded. The "market" is for those docs to be as simple as humanly possible. A certificate of incorporation is a page or so. No protections at all for the founders in there, most often.
But when you bring in investors, the market is to lard up that same document with investor protections and no protections for founders.
That's how founders get screwed. It's not that the complications are there to screw founders. It's that the standard forms are built with one party's interests in mind.
Most terms are pretty standard now. And most of them have good reasons for existing — usually to align the founders and investors. Just because a term is complex and could benefit the investor doesn’t mean it’s meant to mislead.
But, I’m interested in some examples that might shake my opinion about up!