An Indemnification Agreement sets forth procedures by which your startup will indemnify one of its officers or directors (the individual who signs the agreement), thereby minimizing his or her personal liability for actions taken on behalf of your startup.
The Indemnification Agreement generated by SmackDocs was developed by a working group of the National Venture Capital Association, and (in addition to providing protection for individual officers and directors) it allows you to indemnify entities (usually venture capital firms) that have committed some of their own directors to your startup’s board. This is a common and accepted practice that helps a venture firm protect its investment. How? It is an unfortunate reality that when a venture capital firm invests in a startup, any lawsuit filed against the startup or its board of directors is certain to name the venture firm as a party. This is because a venture firm normally has deeper pockets and greater resources with which to settle a claim than the startup being sued. Though there are divergent views in the startup community regarding the indemnification of venture capital firms, SmackDocs believes that doing so is fair and appropriate. Any venture firm with which you do business will appreciate it too.