the D's and Dont's as regards entering a Term Sheet

1. Term Sheet Battle
FYFN
Barcelona, February 25, 2014

2. Introduction
■ It’s only a non-binding term sheet
■ When do I involve a lawyer?
■ VCs only need three rights: Up, Down, and Know What
The Fuck Is Going On
■ First-time entrepreneurs remain reluctant to lower
valuations and find a way to work with investors on
terms
■ Roadmap for the direction an investor is most likely
going to take with their investment and the conditions
that need to be met along the way
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3. ■ “Having information that the other side doesn’t have gives [VCs] an
advantage… they take advantage of entrepreneurs who haven’t been
through this before… they were totally willing to take advantage of
us”
– Mitch Kapor, Founders at Work
■ “Knowledge is Power”
– Sir Francis Bacon
■
■
“It’s only boilerplate”
“Let’s use the projections from your plan for the benchmarks”
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4. How can we proceed?
… which is the right path?
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5. Are you ready for the battle?
Which is your leverage?
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6. The alternatives
 Friends & Family
 Business Angel
 Venture capital
 Other alternative financing
schemes
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7. The alternatives – Friends & Family
 Concept
 Issues that may arise
 Advantages/Disadvantages
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8. The alternatives – Business Angel
 Concept
 Issues that may arise
 Advantages/Disadvantages
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9. The alternatives – Venture Capital
 Concept
 Issues that may arise
 Advantages/Disadvantages
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10. The alternatives - Other alternative financing
schemes
 Concept
 Issues that may arise
 Advantages/Disadvantages
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11. Term Sheet
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12. Standard Provisions
• A sale of the company or other “Liquidation Event”
• Any amendment to the company’s Certificate of Incorporation
or Bylaws so as to alter or change the powers, preferences or
special rights of the shares of Preferred Stock so as to affect
them adversely
• Any increase or decrease (other than by conversion) in the total
number of authorized shares
• The authorization or issuance of any equity security having a
preference over, or being on a parity with, any series in
connection with dividends, liquidation or redemption
• Any declaration or payment of any dividends or any other
distribution on account of any shares of Preferred Stock or
Common Stock
• Any change in the authorized number of directors
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13. Non Standard Provisions
 Any hiring, firing or change in the
compensation of any executive officers
 The entering into any transaction with
any director, executive or employee of
the Company
 Any incurrence of indebtedness in
excess of $[100,000]
 Any change in the principal business of
the company or the entering into any
new line of business
 Any purchase of a material amount of
assets of another entity
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14. Conclusions
Alternatives exist
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15. “Wheat To Bread”
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16. Thank you very much for your attention.
Pablo Vinageras
pablo.vinageras.cobielles@garrigues.com
S&E Desk - J&A Garrigues, S.L.P.
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