On October 2, 2025, the National Venture Capital Association quietly rolled out the newest version of its Model Legal Documents. If you’ve closed a venture round in the last couple of years, most of these updates will look familiar. They reflect the way the market has already been behaving: staged rounds, heavier diligence on data and foreign ties, more thoughtful governance, and clearer closing mechanics.
Here’s what changed and what it means for your next deal.
1. Tranche Financings: From Workaround to Mainstream
One of the biggest changes is right up front in the Stock Purchase Agreement: explicit support for milestone-based or “tranched” financings.
What it is: Instead of funding the full round upfront, investors release capital in stages as the company hits specific milestones. Five million now, another five million when you hit $10M ARR or secure FDA approval.
Why now: The tougher fundraising environment of 2023-2024 pushed investors toward “just-in-time” capital deployment. Tranched structures have long been common in life sciences. Now they’re showing up in early-stage tech, AI, and deep-tech deals too.
What to watch:
- Who decides if a milestone’s been met? The board? A majority of investors? An independent third party? Get this in writing.
- What if funding stalls? The new language includes an optional provision that converts an investor’s preferred stock to common if they fail to fund later tranches. They lose their liquidation preference, anti-dilution protection, and other preferred rights. This isn’t theoretical anymore; it’s in the model forms.
- Dispute risk: Tranched deals increase the surface area for conflict. Define milestones with objective, auditable criteria. If you’re relying on “launch version 2.0” or “sign 10 enterprise customers,” make sure there’s no ambiguity about what counts.
Bottom line: Tranched structures align capital with progress, but they require more upfront legal work and clearer communication. Expect to see more of these in 2026.
2. Acquihires Now Need Investor Consent
Buried deeper in the update is a new protective provision covering acquihire transactions. These are sales that are really about talent, not the business itself.
Why this matters: After several headline-grabbing deals in 2024-25 where teams joined larger acquirers and investors were left with little to nothing, the NVCA added explicit approval rights for preferred holders.
For founders: If an exit opportunity looks more like a team-hire than a true acquisition, expect investor scrutiny. Start that conversation with your board early. Don’t present it as a done deal.
For investors: You now have a clear veto right over deals that might satisfy nominal sale price thresholds but effectively abandon the company’s core business and assets.
This provision recognizes what we’ve all seen: not every “exit” benefits everyone equally.
3. National Security and Data Security Representations
The SPA now includes two-way representations for both companies and investors tied to recent U.S. national security programs:
Outbound Investment Security Program (OISP): Companies must confirm they’re not engaged in “covered activities” in areas like AI, semiconductors, or quantum computing with countries of concern (primarily China, but also Hong Kong, Macau, and others).
Data Security Program (DSP): Both sides must confirm they’re not “covered persons.” That means foreign-linked entities with access to sensitive U.S. data categories like genomic, biometric, geolocation, or health information.
Why it’s two-way: Regulatory exposure travels in both directions. A founder with undisclosed foreign ties could jeopardize customer contracts or government grants. An investor with problematic LP composition could introduce enforcement risk across their entire portfolio.
What to do:
- Companies: Map your foreign subsidiaries, contractors, data flows, and compute resources (especially AI training using foreign cloud providers). Budget 2-4 weeks before fundraising for this diligence.
- Investors: Review your LP composition, co-investment SPV structures, and fund documents. Can you make clean OISP/DSP representations? If not, address it before you issue a term sheet.
National security compliance is no longer niche. It’s now seems to be mainstream venture hygiene.
4. Side Letters Get Brought Into the Light
Side letters (the quiet side deals that often sit outside the main stack) now have their own definition and are specifically called out to be listed in the disclosure schedules.
Why this matters: Greater transparency and consistency, but less room for back-channel arrangements to get a deal done. While disclosure was arguably always required, these changes make it much harder to justify living in the gray.
5. Governance and Reporting: One Size Doesn’t Fit All
The Investors’ Rights Agreement still includes optional sections on governance, DEI, HR policies, and compliance frameworks. But they’re now presented as options rather than prominently recommended defaults.
The shift: Early-stage companies shouldn’t be locked into frameworks meant for Series D issuers. Later-stage companies, on the other hand, may want these policies in place to smooth institutional diligence.
Adopt the structure that matches your stage and investor base, not a checkbox compliance list. This reflects a more pragmatic, less prescriptive approach to governance.
6. Streamlined Mechanics That Practitioners Will Appreciate
Some of the most satisfying changes are the ones only deal lawyers would notice, but they eliminate friction in every closing:
Convertible Notes: Companies can now list noteholders who converted into the round but didn’t sign the SPA. We all know this is often the reality; now it’s explicitly contemplated.
Lead Counsel Fees: The lead investor can pay its counsel directly and deduct that amount from its investment, with the company receiving full credit. This eliminates the awkward practice of startups writing checks to investor law firms. Cleaner flow, same economics, better optics.
Wire Timing: The SPA now includes explicit language allowing additional time for wire transfers. What we used to handle with informal email nudges and closing date extensions now lives right in the document. This is especially helpful for international investors and complex SPV structures that can’t seem to execute same-day wires.
The NVCA is quietly codifying the practical workarounds that happen in every real-world closing. These changes won’t make headlines, but they’ll save hours in every transaction.
Bottom Line
The 2025 NVCA updates don’t introduce radical new ideas. They largely formalize what’s already happening in venture financings today.
For founders: Think more carefully about how rounds are structured, who sits around the table, and what regulatory exposure you might carry into a financing.
For investors: Your model forms now better reflect the world you’ve been negotiating in. Update your form term sheets accordingly.
For lawyers: A little less markup, a little more alignment, and fewer “why isn’t this in the form?” conversations.
Compare the Changes
We’ve prepared redline versions of all updated NVCA model documents (October 2025), highlighting every change with practical commentary.
About Rubicon Law
Rubicon Law advises founders, investors, and growth-stage companies on venture financings, governance, and emerging-company law. To discuss how these NVCA updates might affect your next round, please contact us.