NEF: Valuation and What Counts

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NEF: Valuation and What Counts
10-15-09

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  • 1. Term Sheet
    October 15, 2009
    What am I worth?
  • 2. Key elements of a Terms Sheet
    Valuation
    Liquidation preference
    Anti-dilution protection
    Dividends / Redemption rights
    Board Composition / Governance
    Participation rights
    Redemption rights
    Protective provisions
    No shop / NDA / Confidentiality
    9/17/2009
    New Enterprise Forum
    2
  • 3. Overview
    9/17/2009
    New Enterprise Forum
    3
    What is a “terms sheet”:
    What every early stage company dreams of
    A culmination of a 6 - 9 month investor due-diligence process
    A 10-12 page document with proposed investment terms
    It is not an LOI (letter of intent)
    Key Concerns for company:
    Control
    Valuation & Dilution of ownership
    Value- add
    Key Concerns for investors:
    Risk, risk, risk…Return
    Management Team
    Governance: When things go wrong….
  • 4. Corporate Structure
    10/15/2009
    New Enterprise Forum
    4
    LLC
    C – Corp
    S – Corp
    State of Incorporation
  • 5. Investors
    10/15/2009
    New Enterprise Forum
    5
    Type
    Individual (Angel)
    LLC (Group of individuals)
    VC Firm
  • 6. Class of Stock
    10/15/2009
    New Enterprise Forum
    6
    Series A Preferred
    Series B Preferred
    Common Stock
    Warrants
    Options
  • 7. Amount Raised
    10/15/2009
    New Enterprise Forum
    7
    Pre-Money – What is the company worth today
    (Based on realistic projections)
    Including $__ from the conversion of principal and interest on bridge notes? How will you clean up debt?
    Investment can be structured as a staged pay-in (tranches), with subsequent installments to be invested if the Company has met certain milestones.
    Plan ahead for future rounds.
  • 8. Capitalization
    10/15/2009
    New Enterprise Forum
    8
    Price Per Share
    Pre-Money Valuation
    Company’s capital structure before and after Closing
  • 9. Liquidation Preference
    10/15/2009
    New Enterprise Forum
    9
    First pay Original Purchase Price plus dividends and/or a multiple of original price on each share of Series A Preferred Stock.
    Balance of any proceeds shall be distributed to holders of Common Stock.
    Participating vs. Non-participating preferred
    Mandatory Conversion automatically occurs in the event of
    IPO at price X times Original Purchase price
    Written consent of holder of __% of Preferred
  • 10. Dividends
    10/15/2009
    New Enterprise Forum
    10
    Non-cumulative dividends on Series A Preferred
    Rate ___%
    When and if declared by the Board
  • 11. Anti-dilution Provisions
    10/15/2009
    New Enterprise Forum
    11
    In the event Company issues securities at a price less than the current Preferred price, such price shall be adjusted in accordance with an agreed to formula
    Weighted average
    Full-ratchet
    No price-based anti-dilution adjustment
  • 12. Term Sheet
    October 15, 2009
    www.newenterpriseforum.org