By many accounts this is the fourth set of free, open-source seed stage documents (entire list).  Supporting Wang is prominent venture capital firm Andreeson Horowitz (started by the founder of Netscape), and a slew of venerable investors such as Ron Conway and First Round Capital.

The documents allow for certain terms like price per share to be filled in the blank.  However, more standard clauses such as investor voting rights are boilerplate.  The documents also include future rights, board seats, and information rights, amongst other clauses.

Minneapolis Attorney Kevin Spreng is no stranger to venture deals, having worked as lead counsel in hundreds of transactions for Robins, Kaplan, Miller & Ciresi and Crescendo Ventures.  He acknowledges the Series Seed documents are not perfect, but applauds the effort as a good start.

Spreng notes that open source documents can slightly reduce barriers to raising money.  “It will potentially be easier for the company to make an offer,” Spreng said.  “And it might make it easier for investors to sign up.”

Obviously not all investors plan to use these documents.  Twitter board member and Union Square Ventures Managing Partner, Fred Wilson, supports the intent, but “can’t and won’t get behind the Series Seed forms because they leave out some critical stuff that we simply won’t do a deal without.”

While the documents are completely free, they do stipulate that the company shall reimburse investor’s counsel for a flat fee of $10,000.  This amount in legal fees pales in comparison to the $50,000-$100,000 often incurred in venture financings.  Spreng cautions investors using minimal counsel.  “If investors are doing a seed deal without due diligence, you are making a decision that there will be less upfront cost with potentially more risk in the end.”

In the end, it is the strength of the company and its product/service that will lead to success.  “These docs alone will not make it easier for a Minnesota startup to raise funds,” Spreng said.  “The challenge is still finding the money!”

* What is the valuation (worth) of my company?
* Should the investment be structured as equity or debt?
* How much of the company should I sell to investors?

There are a multitude of answers to the above questions, but David Cohen of TechStars has a very pragmatic approach to tackle these tough issues. He suggests seed funding should be structured as convertible debt, that is  “a loan that gets swapped for equity in the next round of financing.” Ideally the next round of financing is for a more meaningful figure and is lead by an angel fund or venture capital group. The benefits to this structure are two-fold:

1. A more proper valuation can be arrived at, as the company has matured and developed a functioning business model.

2. Professional investors are better equipped to arrive at a more practical valuation.

So, if the investor’s loan converts into equity at a later date, what incentivizes the individual to fund at seed stage? Therein lies the discount. At the conversion, the seed investor receives a discount per share compared to the institution’s per share price. Cohen suggests a 20% discount per share, to appease new and old investors.

In essence, the young startup is able to receive the funding it needs to grow, without the many headaches associated with financing structure. These issues can be dealt with at a later date, with the insight of professional investors, to boot.