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11
Term Shit
ee
11
i) Some tips
ii) Economics
iii) Control
iv) BS
11
Tips
i) Pee or get off the pot
ii) Know what you want
iii) Have your materials ready
iv) Be ready for due diligence
v) ...
11
Price
Pre-money vs. Post-money
500k @ 2M pre-money = 20%
500k @ 2M post-money = 25%
11
Option pool
Case:
20% option pool case at 2M pre-money
Founders’ pre-money valuation = 1.6M
11
Liquidation preference
i) Full participation vs
ii) Capped participation vs
iii) No participation
11
Liquidation preference
500k at 2M pre-money – 20%
i) 2x not participating
Exit 1: 5M: Investors - 1M / F6S – 4M
Exit 2:...
11
Pay-to-Play
Automatically convert Preferred
stock to Common stock
11
Vesting
i) Cliff
ii) Vesting period
iii) Merger – single vs. double
trigger
11
Other
i) Employee pool
ii) Antidilution
11
Board
Standard composition of 5 person
board:
2 investors
2 founders
1 independent
11
Protection rights
i) Change of terms of stock
ii) Issue new stock
iii) Sell company
iv) Change bylaws
v) Change board
v...
11
Drags and Tags
i) Drag along
ii) Tag along (explained)
11
Q&A
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Term Sheet 101

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Transcript of "Term Sheet 101"

  1. 1. 11 Term Shit ee
  2. 2. 11 i) Some tips ii) Economics iii) Control iv) BS
  3. 3. 11 Tips i) Pee or get off the pot ii) Know what you want iii) Have your materials ready iv) Be ready for due diligence v) Find the right investors vi) Close!
  4. 4. 11 Price Pre-money vs. Post-money 500k @ 2M pre-money = 20% 500k @ 2M post-money = 25%
  5. 5. 11 Option pool Case: 20% option pool case at 2M pre-money Founders’ pre-money valuation = 1.6M
  6. 6. 11 Liquidation preference i) Full participation vs ii) Capped participation vs iii) No participation
  7. 7. 11 Liquidation preference 500k at 2M pre-money – 20% i) 2x not participating Exit 1: 5M: Investors - 1M / F6S – 4M Exit 2: 2M: Investors – 1M / F6S – 1M ii) 2x full participating Exit 1: 5M: Investors - 1M / F6S – 4M Exit 2: 1M: Investors – 1.2M / F6S – 0.8M
  8. 8. 11 Pay-to-Play Automatically convert Preferred stock to Common stock
  9. 9. 11 Vesting i) Cliff ii) Vesting period iii) Merger – single vs. double trigger
  10. 10. 11 Other i) Employee pool ii) Antidilution
  11. 11. 11 Board Standard composition of 5 person board: 2 investors 2 founders 1 independent
  12. 12. 11 Protection rights i) Change of terms of stock ii) Issue new stock iii) Sell company iv) Change bylaws v) Change board vi) Pay dividends vii) Borrow money
  13. 13. 11 Drags and Tags i) Drag along ii) Tag along (explained)
  14. 14. 11 Q&A
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