KISS Note: A General Guide
Jump to Section
ContractsCounsel has assisted 3 clients with kiss notes and maintains a network of 10 financial lawyers available daily.
A KISS note (Keep It Simple Security) is a simplified investment structure resembling a convertible note and helps get capital faster than conventional methods. It is an agreement made between a company and an investor. The signing of the note begins with the investor investing money in the company and receiving the right to purchase shares in the future equity round.
500 Startups created the KISS convertible notes that were made publicly available for everyone. The notes were developed in response to the lack of any investor protection during new collaborations with startups. A KISS note is a conceptual agreement that works depending on the following factors:
- The investor lends finances to a startup, and the loan accumulates the interest amount.
- The investors can exercise their rights to convert the loan into equity if the company grows and becomes profitable.
The KISS convertible note is an efficient medium for investors for multiple reasons:
- It defers the requirement to put any value on the early-stage or pre-revenue companies.
- It allows the investor to convert the note into equity if certain conditions are met, such as the company raising a certain amount of financing.
- It helps shield a company from unwanted outcomes that may happen because of an overhaul of the investor’s stake in it.
What Are the Significant Versions of a KISS Note?
Two significant versions of a KISS note include debt and equity.
-
Debt Version
The debt version of the KISS note conducts the following functions:
- It assigns a specific interest rate and an associated maturity date.
- It allows the investor to convert the investment into a preferred stock after a particular date.
-
Equity Version
The equity version of the KISS note conducts the following functions:
- It does not assign any specific interest or maturity date.
- The KISS note automatically converts the principal and interest into a preferred stock once the company raises at least $1 million in financing.
What Are the Features of a Kiss Note?
Here is a list of features related to the KISS note:
- Identical Terms: All KISS convertible notes are based on the same terms and conditions. The agreements do not allow high-resolution financing at different valuation caps for the founders or investors.
- MFN (Most Favored Nation) Clause: If the company offers a KISS note or convertible instrument with beneficial terms to another investor, the team has to offer the same to their first investor.
- Control and Dividends: An investor does not have any management rights to receive dividends until the KISS note is converted into shares.
- Accounting: A KISS note is not treated as debt on the financial statements of the investors or the company.
Why Should Investors Choose the KISS Note?
The KISS note provides simple and standard ‘open-source’ templates for investors to invest in early-stage companies. Investors use the KISS conceptual notes primarily because they bring simplicity and consistency to the investment processes while offering protection from potential risks.
Not only that but the KISS note offers a few more benefits to the investors that include the following:
- It provides MFN clauses that allow investors to get securities on more favorable terms.
- It also grants additional rights to all major investors interested in new ventures and collaborations.
What Do the Early-Stage Companies Get from the KISS Note?
During the initial fundraising round, KISS notes save time and expenses for the early-stage companies and their founders. Moreover, the agreements also provide a platform for investors to choose the startups to invest their finances. Here is a list of benefits that the founders of early-stage companies or startups can incur from the KISS note:
- The note eliminates the requirement to negotiate terms with investors or pay hefty fees to attorneys to sign deals.
- The KISS Notes are identical and do not leave space for any errors or discrepancies in the agreement terms and conditions.
- The notes are identical series that sound appealing to the investors so that the founders can access the capital instantly.
What Are the Things to Keep in Mind Before Signing A KISS Note?
Although the KISS note may be helpful for both the founders and the investors, a few things should be kept in mind before agreeing.
-
Attorney Review
It is advised that the founders or the investors should not skip an attorney review before finalizing the KISS note. They should not pick any random open-source agreement and hand it off to the interested investor. The concerned parties should approach a professional lawyer well-versed in financing to review the document and explain the possible outcomes.
-
Unwanted Outcomes
Every business organization is different, so the founders must ensure that they do not promise anything on the KISS Note that may lead to unwanted outcomes in the future. It may lead to massive losses or the investors backing off the deal.
-
Find Resources
The founders must be sure whether the KISS note holds significance for their new venture before giving it the go-ahead for upcoming collaborations with investors. If confused, they can seek legal help from an attorney who can help them find the resources to make the best decisions. The process also helps ensure that the company is in the right place and on deadline with its obligations to the investors.
Key Terms Related to a KISS Note
Here is a list of key terms related to the KISS note:
- Investor: An individual or organization who spends money on property, financial schemes, new ventures, etc.
- Company: A commercial business dealing with different products or services.
- Stock: The capital amount a company or corporation raises through the subscription or issue of shares.
- Investment: The process of spending money to earn profit.
- Simple Agreement for Future Equity (SAFE): An agreement that provides a future equity stake to the investor.
- Principle: The original sum committed to the purchase of particular assets in business.
- Asset: A resource that holds economic value to a company, individual, investor, or country with expectations for future benefits.
Conclusion
Investors and companies can seek help from the KISS note to outline the terms and conditions of their collaborations and deals. The best part about convertible notes is that they benefit both parties and help convert profits into preferable stocks. However, the KISS note is a comprehensive document that may be complex for investors or companies to understand. That is why it is advisable to seek legal help in finalizing the notes.
If you want to use KISS notes for investment purposes, visit Contracts Counsel now for the best legal assistance. Our professional attorneys are well-versed in financial matters and can help you with all your requirements related to convertible notes. Visit the official website and state your requirements for a project now!
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Need help with a KISS Note?
Meet some of our KISS Note Lawyers
Jason H.
Jason has been providing legal insight and business expertise since 2001. He is admitted to both the Virginia Bar and the Texas State Bar, and also proud of his membership to the Fellowship of Ministers and Churches. Having served many people, companies and organizations with legal and business needs, his peers and clients know him to be a high-performing and skilled attorney who genuinely cares about his clients. In addition to being a trusted legal advisor, he is a keen business advisor for executive leadership and senior leadership teams on corporate legal and regulatory matters. His personal mission is to take a genuine interest in his clients, and serve as a primary resource to them.
Cory B.
Attorney Cory Barack specializes in business, real estate, probate, and energy law. He can help you with oil/gas leases, easements, property sales, drafting contracts and wills, setting up companies, and resolving disputes. He is licensed to practice law in Ohio and is located in Eastern Ohio.
Matthew H.
We are a boutique firm located in San Diego that handles civil litigation with a couple other areas of law.
January 24, 2022
Cameron S.
A commercial contracts lawyer with over 25 years of experience (both at large law firms and in-house as general counsel of a public company)
December 4, 2021
Brittany B.
Brittany advises startups and emerging and public companies at all stages of growth, with focuses on formation and corporate governance matters, securities, venture capital financings, M&A and other strategic transactions, commercial contracts and general corporate counseling. Brittany represents clients across a broad spectrum of industries, including technology, automotive, mobility, digital health, consumer products and manufacturing.
December 5, 2021
James A.
James Allen is a native of Birmingham, Alabama. Mr. Allen has a considerable amount of experience in the areas of domestic relations, family law, criminal law, and general civil litigation, both at trial and on appeal in state court.
December 6, 2021
Emily Y.
I am available to advise on entity formation, contracts, and employment policies. I am also comfortable litigating business disputes including partnership disputes and employment cases. Prior to opening my current practice, I worked for several years in a small civil litigation practice focused on employment matters and civil litigation. I attended law school at the University of Colorado, and I went to the University of British Columbia for my undergraduate education.
Find the best lawyer for your project
Browse Lawyers NowQuick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewNeed help with a KISS Note?
Financial lawyers by top cities
- Austin Financial Lawyers
- Boston Financial Lawyers
- Chicago Financial Lawyers
- Dallas Financial Lawyers
- Denver Financial Lawyers
- Houston Financial Lawyers
- Los Angeles Financial Lawyers
- New York Financial Lawyers
- Phoenix Financial Lawyers
- San Diego Financial Lawyers
- Tampa Financial Lawyers
KISS Note lawyers by city
- Austin KISS Note Lawyers
- Boston KISS Note Lawyers
- Chicago KISS Note Lawyers
- Dallas KISS Note Lawyers
- Denver KISS Note Lawyers
- Houston KISS Note Lawyers
- Los Angeles KISS Note Lawyers
- New York KISS Note Lawyers
- Phoenix KISS Note Lawyers
- San Diego KISS Note Lawyers
- Tampa KISS Note Lawyers
ContractsCounsel User
Drafting kiss agreement for investor
Location: New York
Turnaround: Less than a week
Service: Drafting
Doc Type: KISS Note
Number of Bids: 6
Bid Range: $600 - $2,500
ContractsCounsel User