Simulating the outcomes of contracts: A visual interface supporting start-up financing

Abstract

The potential of visualizations for negotiating and representing contracts has been explored in current research around the innovation of law. Visualizations help to increase transparency of legal matters and contribute not only to a better understanding of agreements, but to the overall deal-design. We propose a visualized simulation displaying the outcomes of complex start-up investment agreements at various points in the future. By capturing the standard variables of start-up financing term-sheets, the system supports the pre-negotiation phase between entrepreneurs and investors. Relying on the agent-based modeling framework NetLogo, we facilitate dynamic simulations with parties entering their own priorities and assumptions about the other side. We believe such a tool could prove useful on crowd-funding platforms with their increase of investor-founder relationships. In further research, specific contracts may be tested with populations of entrepreneurs and investors, yielding insights on the desirability of various deal structures.