New York – May 10, 2019 – ConsenSys and global law firm Latham & Watkins LLP are pleased to announce the launch of the Automated Convertible Note, an OpenLaw-based document generator to help startups raise capital with customizable market standard terms and optional digital token provisions. To access the online tool, please visit the website.
ConsenSys’ in-house legal team collaborated with Latham & Watkins’ emerging companies, fintech, and finreg practices to develop the Automated Convertible Note. The document generator relies on OpenLaw, a ConsenSys project which is building blockchain-based infrastructure to streamline commercial relationships through a suite of tools for token generation, contract automation, e-signature, and smart contracts components.
“Working with Latham & Watkins—a firm with unique and deep insight into the legal and regulatory issues in this space—was very important to us because we wanted to be sure our generator could be used to create a sound convertible note with market standard terms. We are also grateful to 500 Startups for collaborating with us on the use of the form KISS as the basis for our document,” said David Cios, a member of the ConsenSys legal team.
Digital token provisions are an important feature of the Automated Convertible Note. “We invest in many startups that leverage blockchain technology to build products and services for the new tokenized economy. If any startup is contemplating distributing digital tokens in the future, we believe our Automated Convertible Note builds in the appropriate guardrails to address potential regulatory issues relating to tokens,” said Wee Ming Choon, also a lawyer at ConsenSys.
Miles Jennings, a senior associate in Latham & Watkins’ Silicon Valley office and member of the firm’s Emerging Companies Practice, said: “We are pleased to have collaborated with ConsenSys, a thought leader and innovator in the blockchain technology space, on a tool that will help startups efficiently raise capital, particularly in this critical and fast-evolving market.”
Yvette Valdez, a partner in Latham’s New York office and member of the firm’s FinTech Industry Group, said: “We are very excited to be part of the offering of a convertible note tool that addresses the commodities regulatory issues present in investment structures that offer the investor a right to tokens.”
“The online document generator builds in protections and much needed flexibility to navigate securities regulatory concerns in nascent token projects,” added Stephen Wink, a partner in Latham’s New York office, a member of the firm’s FinTech Industry Group, and Co-Chair of the firm’s Blockchain and Cryptocurrency Task Force.
The Automated Convertible Note is free to use and accessible on ConsenSys’ website. Through the website, users can quickly create a customizable draft convertible note agreement for US corporations. The website also includes links to (a) the Brooklyn Project, a ConsenSys and industry-wide initiative to promote token-powered economic growth and consumer protection, which allows anyone to leave a comment on any part of the full template, and (b) a simple cap table spreadsheet that can help calculate equity dilution and conversion for founders and investors.
As an incubator, investor and leader in the blockchain space, ConsenSys is keenly interested in reducing legal frictions for young startups. “We hope the Automated Convertible Note will allow entrepreneurs to reduce the time and money spent on early financings so they can instead focus on continuing to push the frontiers of innovation. We’re looking forward to introducing additional and complementary tools to further that goal,” said Federico F. Soddu, a lawyer at ConsenSys.