Founding stages for startups and basic documentation
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STARTUP LEGAL
Founder Institute session
2013-05-20
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Agenda
• How Founding Works?
• Documentation
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Stages of Founding
• Internal founding
– Founder
– Co-Founders
– Friends and Family (…and Fools)
• External founding
– Seed round
– Round A, B…
– IPO
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Internal founding
Founder
PLN 0
Founder100%
$
Stages
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Internal founding
Co-founders
PLN 10,000
Founder50%
Co-Founder
50%
$
Stages
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Internal founding
Family&Friends
PLN 20,000
Founder37,5%
Co-Founder
37,5%
Uncle5,0%
Option pool
20,0%
$
Stages
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External founding
Seed round
PLN 200 k
(at PLN 1 M valuation)
Founder31,2%
Co-Founder
31,2%
Uncle4,2%
Seed fund
16,7%
Option pool
16,7%
$
Stages
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External founding
Round A
PLN 2 M
(at PLN 4 M valuation)
Founder19,2%
Co-Founder
19,2%
Uncle2,6%
Seed fund
10,3%
First employee
1,8%
VC33,3%
Option pool
13,6%$
Stages
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External founding
IPO
PLN 235 M
(at PLN 2,6 bln valuation)Founder
17,6%
Co-Founder
17,6%
Uncle2,4%
Seed fund9,5%
First employee
1,7%
VC30,5%
Public8,3%
Option pool
12,4%
$
Stages
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Agenda
• How Founding Works?
• Documentation
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US vs PL documents
USA
• Term Sheet
• Stock Purchase Agreement
• Certificate Of Incorporation
• Investor Rights Agreement
• Voting Agreement
• Right of First Refusal and Co-
Sale Agreement
• Management Rights Letter
• Indemnification Agreement
• Model Legal Opinion
PL
• „Term Sheet” - opcjonalnie
• Umowa inwestycyjna
• Zmiany do umowy spółki
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Term sheet
• A term sheet is a bullet-point document outlining the material
terms and conditions of a business agreement
– It implies the conditions of a business transaction
• A term sheet generally covers the more important aspects of a
deal, without going into every minor detail and contingency
covered by a binding contract
– For example, a term sheet from a venture capital company that is
investing in an early-stage company may contain such details as: the
amount of investment, the percentage stake sought, anti-dilutive
provisions and valuation
• Used to prepare final agreement
– Binding (all terms are obligatory)
– Non binding (it guides, but is not necessarily binding the final terms of
their agreement)
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Term sheet should include:
• Closing Date
• Investors
• Money raised (the investment)
• Price Per Share
• Pre-Money Valuation
• Capitalization (structure of capital)
• Additional Clauses (optionally):
– Dividends
– Voting Rights
– Drag-along rights („Pociągnięcie”)
– Tag-along rights („Przyłączenie”)
– Liquidation Preference
– Participation Preference
– Anti-dilutive
– Clawback
– ect.
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Sources
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Sources
• http://en.wikipedia.org/wiki/Term_sheet
• http://nvca.org/index.php?option=com_content&view=article&id=10
8&Itemid=136
• http://www.investopedia.com/