Published on the 17/09/2015 | Written by Newsdesk

A common complaint from New Zealand startups is that local seed investor documents are founder-unfriendly and painfully complex…

Addressing the issue, technology law firm Simmonds Stewart has published two new seed investment documents in its library of free legal templates for use by New Zealand startups.

The first, called KiwiKISS (Kiwi keep investment simple security) is based on 500 Startups’ ‘keep-it-simple-security’ (KISS), while the second, KiwiSAFE (Kiwi startups agreement for future equity) is based on Y Combinator’s ‘simple agreement for future equity’ (SAFE).

Simmonds Stewart said the terms of the documents are faithful to the principles of the original US versions, which have received wide acceptance not only in the that country but also in Southeast Asia. However, they are modified for use in New Zealand and will be familiar to users of the company’s other free templates in terms of style and simplicity.

Lee Bagshaw, who regularly advises on venture capital financing deals in Southeast Asia, said, “In Singapore, where there have been a multitude of seed investments executed in the last three years, the Y Combinator SAFE and 500 Startups KISS are commonly adapted for use locally. The familiarity to local and global investors of the terms set out in these documents creates significant efficiencies on deal execution. Any investment up to US$1 million is typically by way of some form of convertible note. 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 said New Zealand is significantly out of sync with global venture capital trends; seed investments in this country commonly involve investor friendly documentation that can run to over 50 pages. He said the restrictive and often onerous terms imposed in these deals would rarely be seen in the US and in other tech hubs until the company was raising a much larger ‘series A’ financing round.

In contrast, seed investments using the KiwiKISS or KiwiSAFE documents would involve a simple 10 page agreement on internationally standard terms.

Simmonds Stewart said the upside for startups using the KiwiKISS or the KiwiSAFE is a simple investment document without lots of terms to negotiate or limiting the future options of the company. This will allow startups to spend their time and money on growing their businesses.

For investors, a key upside is avoiding the painful arguments about startup valuations that go with the existing equity investment model.

Managing partner Andrew Simmonds said the law firm is continually looking at ways to innovate and help grow the NZ tech sector. “The success of early stage companies is dependent not just on the availability of capital but also on the ability to execute deals efficiently.”