Startup equity & financing, explained for Canadian founders
Founders raising a round or bringing on a co-founder run into the same handful of documents, over and over: SAFEs, convertible notes, term sheets, shareholder and founders agreements, vesting schedules, ESOPs, and cap tables. Here’s a plain-language answer for each one, grounded in how financing actually works in Canada — including the model term sheets published by the CVCA (Canadian Venture Capital Association). Ruby drafts all of these on a flat fee, starting at $299 per agreement, with a licensed Canadian lawyer reviewing every document before it goes out.
Raising capital
SAFE (Simple Agreement for Future Equity)
The fastest way most Canadian pre-seed and seed rounds get done: an investor puts money in today for the right to shares later, once a priced round sets the valuation. No maturity date, no interest, and a lot cheaper and faster to close than a full equity financing.
Convertible Note
A short-term loan that converts into equity at your next financing round, usually at a discount to what new investors pay. The choice where investors want a SAFE's speed but with debt-like protections attached, such as a maturity date and interest.
Term Sheet
The non-binding summary of a deal's key terms, valuation, amount, investor rights, signed before the binding legal agreements are drafted. Canadian VC-backed rounds are frequently built on the model term sheets published by the CVCA (Canadian Venture Capital Association).
CVCA model term sheets →Equity & governance
Shareholder Agreement
The rulebook between a company's owners: how decisions get made, what happens if a shareholder leaves, how disputes get resolved. Any Canadian startup with more than one shareholder needs one in place before problems start, not after.
Do I need a shareholder agreement? →Founders Agreement
The contract between co-founders, signed before anything else: equity split, roles, vesting, and what happens if a founder leaves. Often the first legal document a startup should have, and frequently the one founders skip until it's too late.
The contracts every founder needs →Vesting Schedule
Equity earned over time, not handed over all at once: usually several years with a one-year cliff before anything vests. Protects the company from a large, unearned equity stake sitting with someone who left early.
Employee Stock Option Plan (ESOP)
The pool of equity a company sets aside to grant employees as options over time. Needs board approval and proper documentation to avoid tax and securities issues down the line.
Cap Table
The record of who owns what, and how much: who holds shares or options, and what percentage of the company each stake represents. Investors review this closely during fundraising and diligence; a messy or undocumented cap table is a common red flag.
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