This webinar is critical for entrepreneurs who will be raising a preferred round in the near future. This webinar is designed to teach you what to expect when your company sells preferred stock in a venture round. During this webinar, veteran Silicon Valley venture capital attorney Jason Putnam Gordon will cover the following topics: · What venture capitalists are looking for when they invest in a company · What makes a company a potential investment for a venture capital fund · Pre-round issues · What makes a good investor and how to find them · How to negotiate a term sheet · The deal documentation · The diligence process · Closing issues · Post-closing issues · Common pitfalls when raising venture capital · And much, much more Come with your questions and get ready to get excited about venture capital financings!

1. How to Do a Venture Capital Financing
Presented on January 7, 2021 by Jason Putnam Gordon
Email: jgordon@polsinelli.com

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• Today’s Discussion is General Information – Not Legal Advice
• We will be discussing rules and exceptions thereto. Those rules,
exceptions, and exceptions to the exceptions may not be applicable to your
situation.
• You need to retain competent legal counsel to review all facts and
circumstances before weighing in with advice.
• Off-the-cuff answers to your questions are not, and should not be taken as,
legal advice.
Important Caveats

3. 3
• My Background
• Big Picture
• What VC’s are looking for in an investment and what makes a
good investor
• Pre-round considerations
• How to negotiate a term sheet
• Deal documentation
• Diligence process
• Closing and post-closing issues
• Common pitfalls and traps for the unwary
Overview

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• Venture Capital and Emerging Growth Company attorney—practicing law
since 2005.
• Polsinelli is an Am Law 100 firm with approximately 900 attorneys in over
twenty offices throughout the US.
• My office is in San Francisco, but I work with companies throughout the
US and the world.
• I love working with entrepreneurs on financings and as outside general
counsel.
My Background

5. 5
• Survey results
What is your Background?

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Big Picture
Create Increasing Value
Idea(s)
(Intangible Assets)
Technicians who have
skills like: sales,
marketing, business
acumen
(Services)
Investors
(Capital)

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Big Picture
Create Increasing Value
Idea(s)
(Intangible Assets)
Technicians who have
skills like: sales,
marketing, business
acumen
(Services)
Investors
(Capital)
Company Increases in Value

8. What VCs Want and Who Makes a Good
Investor
 Funds Objectives
 Building a portfolio where a few companies will be home runs
 Fund’s life is usually around 10 years
 Strategic investors have different considerations
 Company’s Objectives
 Investors that will add value beyond dollars contributed
 Investors that will be supportive of the company

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 Correct structure
 Having company documentation in place
 Modeling round
Pre-Round Issues

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 At this level term sheets are not standard, although some deal points
are standard deal points
 How much of the company is being sold based on a valuation
 Dividends
 Liquidation preferences
 Voting Rights
 Protective provisions
 Optional and Mandatory Conversion
 Antidilution protection
 Vesting for founders
 Documentation
 Attorneys Fees
 No Shop and Confidentiality Provisions
 Whether investors will get a board seat
How to Negotiate a Term Sheet

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 Main Financing Documents
 Stock Purchase Agreement
 Amended and Restated Certificate of Incorporation
 Investors Rights Agreement
 Voting Agreement
 Right of First Refusal and Co-Sale Agreement
 Other documents
 Board and stockholder consents
 Waivers
 Side letters
 Pro Forma Cap Table
 Potentially a legal opinion
 Cleanup
Deal Documentation

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 Steps
 Investor request for information
 Open up a data room
 Topics
 Corporate records
 Business plan and financials
 Security Issuances
 Material Agreements
 Disputes and Litigation
 Intellectual Property
 Subsidiaries
 Miscellaneous
Diligence Process

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 Typical Order of Operation of Closing
 Board consent
 Stockholder consent
 Filing charter
 Then closing can happen usually with escrowed signature pages
 Typical post-closing action items
 Securities filings
 228 Notices
 Issuing stock certificates
 Closing binder
Closing and Post-Closing Issues

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 Negotiating before you have run a proper pro forma
 Securities laws issues
 Finders
 Poor record keeping
 Napkin promises
Common Pitfalls and Traps for the Unwary

15. Polsinelli PC provides this material for informational purposes only. The material provided herein is general and is not intended to
be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances,
possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an
attorney-client relationship.
Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results;
that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and
should not be based solely upon advertisements.
© 2020 Polsinelli® is a registered trademark of Polsinelli PC. Polsinelli LLP in California. Polsinelli PC (Inc.) in Florida.
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