Start with the capitalization
Confirm whether the quoted valuation is pre-money or post-money and how the option pool is treated. Identify the amount of new primary capital, any secondary sales and conversions of outstanding instruments. Ask for a capitalization table showing the transaction before and after every step, with the same definitions used in the documents.
Understand the downside economics
Read liquidation preferences, participation, seniority and conversion rights together. These provisions can determine how sale proceeds are distributed among holders. Ask counsel to illustrate several exit values rather than relying on a single upside example. A headline ownership percentage does not fully describe what a holder receives.
Understand control and future obligations
Review board composition, protective provisions, voting agreements, information rights, pro rata participation and transfer restrictions. Identify which actions need investor or board consent. Be clear about ongoing reporting obligations and who must receive information. These terms affect how the company operates after the celebration ends.
Check the process clauses
Ask which provisions are binding before final documents are signed. Review exclusivity, confidentiality, expense reimbursement, diligence conditions and termination rights. Assign an owner to each open issue and reconcile the final agreements with the agreed terms. Model documents are a useful vocabulary, not a substitute for advice on your deal.
Put it into practice
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General education, not individualized investment, legal or tax advice. Rules, eligibility and product terms can change. Confirm the requirements for your company with qualified professionals.