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NEF: Valuation and What Counts
 

NEF: Valuation and What Counts

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NEF: Valuation and What Counts

NEF: Valuation and What Counts
10-15-09

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    NEF: Valuation and What Counts NEF: Valuation and What Counts Presentation Transcript

    • Term Sheet
      October 15, 2009
      What am I worth?
    • 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
    • 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….
    • Corporate Structure
      10/15/2009
      New Enterprise Forum
      4
      LLC
      C – Corp
      S – Corp
      State of Incorporation
    • Investors
      10/15/2009
      New Enterprise Forum
      5
      Type
      Individual (Angel)
      LLC (Group of individuals)
      VC Firm
    • Class of Stock
      10/15/2009
      New Enterprise Forum
      6
      Series A Preferred
      Series B Preferred
      Common Stock
      Warrants
      Options
    • 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.
    • Capitalization
      10/15/2009
      New Enterprise Forum
      8
      Price Per Share
      Pre-Money Valuation
      Company’s capital structure before and after Closing
    • 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
    • Dividends
      10/15/2009
      New Enterprise Forum
      10
      Non-cumulative dividends on Series A Preferred
      Rate ___%
      When and if declared by the Board
    • 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
    • Term Sheet
      October 15, 2009
      www.newenterpriseforum.org