Brian Kelly
Is investing in non-voting shares of a pre-seed company a non-starter?
Great company with good traction and an impressive founder.
Generally speaking, investing in non-voting shares of a pre-seed company is not recommended nor best practice.
Notwithstanding the traction and founder, if a Delaware domiciled startup is raising funding in a typical pattern, it typically raises on a SAFE (or similarly structured convertible instrument) - these will convert into Preferred Equity upon the company raising a priced round (Series Seed or Series A). Preferred Equity will most definitely have voting rights (in fact most of the time there is a separate lengthy legal agreement spelling these rights out).
If such a startup is offering common stock to venture capital firms, with the added stipulation that these shares do not have voting rights, it warrants caution.
Notwithstanding the traction and founder, if a Delaware domiciled startup is raising funding in a typical pattern, it typically raises on a SAFE (or similarly structured convertible instrument) - these will convert into Preferred Equity upon the company raising a priced round (Series Seed or Series A). Preferred Equity will most definitely have voting rights (in fact most of the time there is a separate lengthy legal agreement spelling these rights out).
If such a startup is offering common stock to venture capital firms, with the added stipulation that these shares do not have voting rights, it warrants caution.