Term Sheet 101

14
11 Term Shit ee

description

 

Transcript of Term Sheet 101

Page 1: Term Sheet 101

11

Term Shitee

Page 2: Term Sheet 101

11

i) Some tipsii) Economicsiii) Controliv) BS

Page 3: Term Sheet 101

11

Tips

i) Pee or get off the potii) Know what you wantiii) Have your materials readyiv) Be ready for due diligencev) Find the right investorsvi) Close!

Page 4: Term Sheet 101

11

Price

Pre-money vs. Post-money

500k @ 2M pre-money = 20%500k @ 2M post-money = 25%

Page 5: Term Sheet 101

11

Option pool

Case:20% option pool case at 2M pre-money

Founders’ pre-money valuation = 1.6M

Page 6: Term Sheet 101

11

Liquidation preference

i) Full participation vsii) Capped participation vsiii) No participation

Page 7: Term Sheet 101

11

Liquidation preference

500k at 2M pre-money – 20%i) 2x not participatingExit 1: 5M: Investors - 1M / F6S – 4MExit 2: 2M: Investors – 1M / F6S – 1M

ii) 2x full participatingExit 1: 5M: Investors - 1M / F6S – 4MExit 2: 1M: Investors – 1.2M / F6S – 0.8M

Page 8: Term Sheet 101

11

Pay-to-Play

Automatically convert Preferred stock to Common stock

Page 9: Term Sheet 101

11

Vesting

i) Cliffii) Vesting periodiii) Merger – single vs. double

trigger

Page 10: Term Sheet 101

11

Other

i) Employee poolii) Antidilution

Page 11: Term Sheet 101

11

Board

Standard composition of 5 person board:2 investors2 founders1 independent

Page 12: Term Sheet 101

11

Protection rights

i) Change of terms of stockii) Issue new stockiii) Sell companyiv) Change bylawsv) Change boardvi) Pay dividendsvii) Borrow money

Page 13: Term Sheet 101

11

Drags and Tags

i) Drag alongii) Tag along (explained)

Page 14: Term Sheet 101

11

Q&A