From veteran Dan Rosen. This is a very useful guide on a term sheet that is relatively common in angel investing. Good general guide although terms vary by region and angel group.
Sample Silicon Valley Series A Term Sheet from DLA Piper [SVNewTech]Vinnie Lauria
This is a sample silicon valley Series A term sheet. Presented at the January Silicon Valley New Tech Meetup.
Presented by Brad Rock, partner at DLA Piper.
Full presentation with this sample term sheet are available - http://www.vinnie.net/2010/01/08/silicon-valley-term-sheets-presented-by-brad-rock-at-the-svnewtech/
http://www.dlapiper.com/
This document defines terms related to equity for private companies. It discusses various types of stock like common stock, preferred stock, and convertible securities. It also defines related concepts like pre-money valuation, post-money valuation, fully diluted shares, liquidation preferences, and securities laws governing the issuance of equity. The document is intended to provide a dictionary of commonly used terms when discussing private company equity structures and financings.
1) Contracts for difference allow private equity funds to gain exposure to and influence over a target company without directly holding shares, by entering into contracts tied to the share price.
2) Forming a consortium with other parties to jointly bid for a target company allows each member to pool resources to make an attractive offer and gain control over the target.
3) Proper due diligence is essential before making any takeover offer to understand any issues with the target company and avoid being able to later withdraw the offer or invoke conditions that were previously known.
Raymond James financial advisors can address the unique planning needs of corporate executives. They understand the challenges executives face in balancing personal and corporate responsibilities and objectives. Raymond James offers individualized strategies that span issues affecting executives, including stock option planning, restricted stock strategies, cash management solutions, and reducing risk from concentrated stock positions. Advisors also provide investment management, estate planning assistance, and philanthropic strategies tailored to each client's goals and circumstances.
The document discusses proposed amendments to regulations regarding insider trading and short swing profits in India. Key points include: 1) Requiring substantial shareholders holding over 5% shares to disclose their holdings but exempting them from insider trading regulations; 2) Clarifying applicability of regulations to trading in derivative products; 3) Exempting transactions in derivative products from certain insider trading requirements due to their short tenures; 4) Clarifying treatment of employee trusts and stock option plans under short swing profit regulations.
The Most Common Mistakes Entrepreneurs Make from a Legal PerspectiveStartup Grind
The document discusses common legal mistakes that entrepreneurs make. It summarizes five categories of mistakes: organizational issues, stock issuances, intellectual property, employment, and fundraising. Within each category, it provides examples of specific mistakes such as selecting an inappropriate business entity, failing to adopt a stock incentive plan, not obtaining ownership of intellectual property, and selling securities to unaccredited investors. The document aims to educate entrepreneurs on legal issues to avoid "paying a little now or a lot later."
The Retail Distribution Review (RDR) comes into effect on 31 December 2012 and will lead to significant changes in the financial advice industry. Key aims are to offer consumers fair and transparent fees, clarity on services received, and advice from highly qualified professionals. All advisers must be qualified to a higher minimum level and undergo continual professional development. The changes are intended to boost consumer confidence and professionalism in financial advice.
ETG Capital offers vendors put options to protect against the risk of customer defaults or bankruptcies. The put options allow vendors to sell their receivables to ETG Capital at a pre-negotiated price if the customer files for bankruptcy or experiences other specified credit events. This provides vendors protection while continuing to supply at-risk customers. ETG Capital's put options are more flexible than trade insurance or factoring agreements and can be tailored to individual customer accounts.
Sample Silicon Valley Series A Term Sheet from DLA Piper [SVNewTech]Vinnie Lauria
This is a sample silicon valley Series A term sheet. Presented at the January Silicon Valley New Tech Meetup.
Presented by Brad Rock, partner at DLA Piper.
Full presentation with this sample term sheet are available - http://www.vinnie.net/2010/01/08/silicon-valley-term-sheets-presented-by-brad-rock-at-the-svnewtech/
http://www.dlapiper.com/
This document defines terms related to equity for private companies. It discusses various types of stock like common stock, preferred stock, and convertible securities. It also defines related concepts like pre-money valuation, post-money valuation, fully diluted shares, liquidation preferences, and securities laws governing the issuance of equity. The document is intended to provide a dictionary of commonly used terms when discussing private company equity structures and financings.
1) Contracts for difference allow private equity funds to gain exposure to and influence over a target company without directly holding shares, by entering into contracts tied to the share price.
2) Forming a consortium with other parties to jointly bid for a target company allows each member to pool resources to make an attractive offer and gain control over the target.
3) Proper due diligence is essential before making any takeover offer to understand any issues with the target company and avoid being able to later withdraw the offer or invoke conditions that were previously known.
Raymond James financial advisors can address the unique planning needs of corporate executives. They understand the challenges executives face in balancing personal and corporate responsibilities and objectives. Raymond James offers individualized strategies that span issues affecting executives, including stock option planning, restricted stock strategies, cash management solutions, and reducing risk from concentrated stock positions. Advisors also provide investment management, estate planning assistance, and philanthropic strategies tailored to each client's goals and circumstances.
The document discusses proposed amendments to regulations regarding insider trading and short swing profits in India. Key points include: 1) Requiring substantial shareholders holding over 5% shares to disclose their holdings but exempting them from insider trading regulations; 2) Clarifying applicability of regulations to trading in derivative products; 3) Exempting transactions in derivative products from certain insider trading requirements due to their short tenures; 4) Clarifying treatment of employee trusts and stock option plans under short swing profit regulations.
The Most Common Mistakes Entrepreneurs Make from a Legal PerspectiveStartup Grind
The document discusses common legal mistakes that entrepreneurs make. It summarizes five categories of mistakes: organizational issues, stock issuances, intellectual property, employment, and fundraising. Within each category, it provides examples of specific mistakes such as selecting an inappropriate business entity, failing to adopt a stock incentive plan, not obtaining ownership of intellectual property, and selling securities to unaccredited investors. The document aims to educate entrepreneurs on legal issues to avoid "paying a little now or a lot later."
The Retail Distribution Review (RDR) comes into effect on 31 December 2012 and will lead to significant changes in the financial advice industry. Key aims are to offer consumers fair and transparent fees, clarity on services received, and advice from highly qualified professionals. All advisers must be qualified to a higher minimum level and undergo continual professional development. The changes are intended to boost consumer confidence and professionalism in financial advice.
ETG Capital offers vendors put options to protect against the risk of customer defaults or bankruptcies. The put options allow vendors to sell their receivables to ETG Capital at a pre-negotiated price if the customer files for bankruptcy or experiences other specified credit events. This provides vendors protection while continuing to supply at-risk customers. ETG Capital's put options are more flexible than trade insurance or factoring agreements and can be tailored to individual customer accounts.
National Instrument 31-103 establishes new harmonized insurance requirements for dealers, advisors, and investment fund managers in Canada. It creates three registration categories and mandates that registrants purchase a Financial Institution Bond that provides coverage for fidelity, on-premises theft, in-transit theft, forgery, and securities. The required coverage limits vary based on the registrant's category. Exempt market dealers and investment fund managers will need to purchase this insurance for the first time to comply with the new rules.
This document defines financial terms from A to G. It provides definitions for terms such as gamma, Garmen-Kohlhagen option pricing model, gearing, general cash offer, and generally accepted accounting principles (GAAP). The document also defines terms related to government securities, gross domestic product, and growth stocks.
Negotiating the Preferred Stock Term SheetBart Greenberg
This slide show outlines and discusses the key elements of a preferred stock term sheet, and shows the range of negotiability of those terms in the best and worst of times.
This document provides tips for teaching children to save money at different ages and life stages:
1) For preschoolers, start with a piggy bank and set simple, short-term saving goals to make it concrete.
2) For elementary through middle school, tie an allowance to responsibilities and divide it into sections for spending, saving, giving, and investing.
3) For high schoolers, expand responsibilities to include gifts, clothing, activities, and technology. Encourage direct deposit of paychecks, saving for college, and starting an IRA with earned income.
The document provides an overview of the Integrity with GFD solution, a new wealth accumulation and protection solution for business owners. It addresses main challenges business owners face like not having enough money for retirement or rewarding family. The Integrity solution offers accelerated wealth accumulation, additional life insurance protection, and significant tax advantages. It works by providing an upfront loan that is deposited into a universal life insurance policy to grow tax-deferred. Business owners can then enjoy multiple exit strategies like selling the business, using it for retirement income, or leaving a financial legacy.
This document provides an overview of business life insurance and estate planning strategies for small business owners. It discusses the importance of succession planning, as 70% of small businesses have no plan and fewer than 30% are passed successfully to the next generation. It also outlines potential risks businesses face and how life insurance can help by protecting assets, reducing uncertainty, and providing financial security. Several insurance products and strategies are described that can help with business continuation, employee retention, and estate planning goals. These include key person life insurance, buy-sell agreements, and various bonus and deferred compensation plans. The document stresses the importance of having professionals like accountants and attorneys on your planning team and working with a life insurance representative to determine the right policies and coverage
Discussion of how a pension plan sponsor may account for a buy-in annuity contract held as a pension investment. Comparison of buy-in vs. buy-out accounting.
The document discusses FDIC-insured deposits as an investment opportunity with higher yields than Treasuries. It notes the full faith and credit guarantee by the US government for deposits up to $250,000 per depositor per institution. It also discusses the structural platform that would source, screen, and construct portfolios of FDIC-insured deposits to overcome hurdles to institutional investment, such as managing insurance limits and minimizing intermediary costs and fees. The platform would source both new issues and secondary market deposits to benefit buyers and sellers.
This document discusses the redemption of debentures by companies. It defines redemption as the repayment of debentures to debenture holders. Redemption can occur at maturity, before maturity if allowed, or through conversion to shares. Companies can redeem debentures through lump sum payment, by draw of lots, purchasing in the open market, or conversion. A debenture redemption reserve must be created under SEBI guidelines to fund redemption. The document provides examples of journal entries to record redemption of debentures at par and premium amounts.
Royalties provide a solid alternative for investing in early stage and privately owned companies. Royalties do not depend on company profits and provide consistent income for investors. Income and value increase as company revenues rise. Royalties offer investors income that increases with company sales without requiring ownership or debt. This summary highlights the key points that royalties offer reliable income independent of profits and that both income and value increase along with growing company revenues according to the document.
This document provides an overview of errors and omissions insurance coverage requirements for investment advisors with ERISA 3(38) fiduciary status. It discusses [1] the fiduciary responsibilities and potential liabilities assumed by 3(38) advisors; [2] the importance of ensuring an E&O policy provides affirmative fiduciary coverage rather than excluding or limiting it; and [3] how contractual liability exclusions may apply to 3(38) advisors and should be modified to clarify coverage intent. The goal is to help 3(38) advisors understand and manage their professional liability risks.
The document discusses four main types of businesses in the UK:
1) Sole trader - Owned and run by one person who is fully liable for all debts. Profits kept solely by the owner.
2) Partnership - Owned and run by 2 to 20 partners who share profits and are all fully liable for debts.
3) Private limited company - Owned by shareholders with limited liability. Profits shared between shareholders as dividends.
4) Public limited company - Similar to a private limited company but shares can be publicly traded on a stock exchange and annual reports must be published.
Here are the key "ins" and "outs" for each net asset category:
Permanently •New donor contributions •None - corpus must be
Restricted required to be held in maintained permanently
perpetuity
32
The document outlines strategies for captive insurance for high net-worth clients, including an overview of captive insurance structures and domiciles. It discusses pure captives, group captives, rent-a-captives and protected cell captives. Key considerations for captive insurance include tax strategies under IRS revenue rulings and using captives for estate planning.
Musyarakah is an Islamic financing principle that involves a partnership between two or more parties to invest in a business venture. Profits are shared according to the partnership agreement, while losses are shared in proportion to capital contributions. There are various types of musyarakah partnerships depending on the roles of the partners. Musyarakah mutanaqisah allows a customer's capital share in a project to gradually increase over time through profit distributions and installment payments until full ownership is acquired.
The document summarizes an interview with Stewart Feldman about the benefits of forming a captive insurance company. Key points include:
- Captives allow business owners to insure risks not covered by traditional insurance and control rising costs.
- Mid-sized businesses with over $1 million in profits annually are good candidates for captives.
- Benefits include tax deductions, control over coverage, and potential profits from underwriting.
- Captives can be owned solely by a business or jointly and allow owners to choose specific risks to insure.
North Star Resource Group provides insurance, investment, retirement, financial planning, and business solutions. Their services include individual and group insurance, investment strategies with a broad range of options, fee-based financial plans, business insurance products, employee benefits, and education. They help with insurance needs analysis, retirement income planning, retirement plan distributions, tax planning, education funding, cash flow analysis, and more. North Star works with various partner companies to offer these solutions.
The document discusses the duty of utmost good faith in reinsurance contracts. It states that this duty requires high levels of honesty and disclosure between the ceding insurer and reinsurer. The ceding insurer must disclose all material facts to the reinsurer during contract formation and ongoing administration of the contract. The duty is mutual, so the reinsurer must also deal fairly with the ceding insurer. While some see it as a fiduciary duty, most courts treat it as a very high standard of good faith just below fiduciary duty. The requirements of the duty may be higher for treaty reinsurance, where the reinsurer relies more heavily on the ceding insurer.
The document summarizes several news stories:
1) A SEBI panel in India favors requiring acquirers in takeover deals to make an open offer for up to 100% of shares in the target company, rather than the current minimum of 20%. This could increase costs for acquirers but provide all shareholders an exit option.
2) AIG will pay $725 million to settle a long-running securities fraud class action lawsuit brought by three Ohio public pension funds over allegations of accounting fraud, bid-rigging, and stock price manipulation from 1999-2005.
3) An interview with Venugopal Dhoot discusses the future revenue and profit mix of his Videocon group, with oil and
Negotiating Venture Capital Term Sheets Joyce Chuang
This document summarizes key terms for negotiating venture capital financing. It discusses structuring the financing round and valuation, investor return mechanisms like liquidation preferences and dividends, control provisions including board composition and protective voting rights, liquidity events, and other standard investor rights and closing conditions. The overall summary is that the document outlines the major components that are negotiated in a venture capital term sheet to structure the financing round and define the rights and obligations of investors and the company going forward.
This document provides an overview of contract reviews and negotiations. It discusses key elements of contracts such as offers, acceptance, certainty of terms, and consideration. It also covers types of contracts, methods of contract formation, parties that can bind contracts, and important contract clauses to consider like limitations of liability, termination, intellectual property, and dispute resolution. The presentation emphasizes getting proper legal advice when entering contracts to avoid unnecessary legal risks and issues down the road.
National Instrument 31-103 establishes new harmonized insurance requirements for dealers, advisors, and investment fund managers in Canada. It creates three registration categories and mandates that registrants purchase a Financial Institution Bond that provides coverage for fidelity, on-premises theft, in-transit theft, forgery, and securities. The required coverage limits vary based on the registrant's category. Exempt market dealers and investment fund managers will need to purchase this insurance for the first time to comply with the new rules.
This document defines financial terms from A to G. It provides definitions for terms such as gamma, Garmen-Kohlhagen option pricing model, gearing, general cash offer, and generally accepted accounting principles (GAAP). The document also defines terms related to government securities, gross domestic product, and growth stocks.
Negotiating the Preferred Stock Term SheetBart Greenberg
This slide show outlines and discusses the key elements of a preferred stock term sheet, and shows the range of negotiability of those terms in the best and worst of times.
This document provides tips for teaching children to save money at different ages and life stages:
1) For preschoolers, start with a piggy bank and set simple, short-term saving goals to make it concrete.
2) For elementary through middle school, tie an allowance to responsibilities and divide it into sections for spending, saving, giving, and investing.
3) For high schoolers, expand responsibilities to include gifts, clothing, activities, and technology. Encourage direct deposit of paychecks, saving for college, and starting an IRA with earned income.
The document provides an overview of the Integrity with GFD solution, a new wealth accumulation and protection solution for business owners. It addresses main challenges business owners face like not having enough money for retirement or rewarding family. The Integrity solution offers accelerated wealth accumulation, additional life insurance protection, and significant tax advantages. It works by providing an upfront loan that is deposited into a universal life insurance policy to grow tax-deferred. Business owners can then enjoy multiple exit strategies like selling the business, using it for retirement income, or leaving a financial legacy.
This document provides an overview of business life insurance and estate planning strategies for small business owners. It discusses the importance of succession planning, as 70% of small businesses have no plan and fewer than 30% are passed successfully to the next generation. It also outlines potential risks businesses face and how life insurance can help by protecting assets, reducing uncertainty, and providing financial security. Several insurance products and strategies are described that can help with business continuation, employee retention, and estate planning goals. These include key person life insurance, buy-sell agreements, and various bonus and deferred compensation plans. The document stresses the importance of having professionals like accountants and attorneys on your planning team and working with a life insurance representative to determine the right policies and coverage
Discussion of how a pension plan sponsor may account for a buy-in annuity contract held as a pension investment. Comparison of buy-in vs. buy-out accounting.
The document discusses FDIC-insured deposits as an investment opportunity with higher yields than Treasuries. It notes the full faith and credit guarantee by the US government for deposits up to $250,000 per depositor per institution. It also discusses the structural platform that would source, screen, and construct portfolios of FDIC-insured deposits to overcome hurdles to institutional investment, such as managing insurance limits and minimizing intermediary costs and fees. The platform would source both new issues and secondary market deposits to benefit buyers and sellers.
This document discusses the redemption of debentures by companies. It defines redemption as the repayment of debentures to debenture holders. Redemption can occur at maturity, before maturity if allowed, or through conversion to shares. Companies can redeem debentures through lump sum payment, by draw of lots, purchasing in the open market, or conversion. A debenture redemption reserve must be created under SEBI guidelines to fund redemption. The document provides examples of journal entries to record redemption of debentures at par and premium amounts.
Royalties provide a solid alternative for investing in early stage and privately owned companies. Royalties do not depend on company profits and provide consistent income for investors. Income and value increase as company revenues rise. Royalties offer investors income that increases with company sales without requiring ownership or debt. This summary highlights the key points that royalties offer reliable income independent of profits and that both income and value increase along with growing company revenues according to the document.
This document provides an overview of errors and omissions insurance coverage requirements for investment advisors with ERISA 3(38) fiduciary status. It discusses [1] the fiduciary responsibilities and potential liabilities assumed by 3(38) advisors; [2] the importance of ensuring an E&O policy provides affirmative fiduciary coverage rather than excluding or limiting it; and [3] how contractual liability exclusions may apply to 3(38) advisors and should be modified to clarify coverage intent. The goal is to help 3(38) advisors understand and manage their professional liability risks.
The document discusses four main types of businesses in the UK:
1) Sole trader - Owned and run by one person who is fully liable for all debts. Profits kept solely by the owner.
2) Partnership - Owned and run by 2 to 20 partners who share profits and are all fully liable for debts.
3) Private limited company - Owned by shareholders with limited liability. Profits shared between shareholders as dividends.
4) Public limited company - Similar to a private limited company but shares can be publicly traded on a stock exchange and annual reports must be published.
Here are the key "ins" and "outs" for each net asset category:
Permanently •New donor contributions •None - corpus must be
Restricted required to be held in maintained permanently
perpetuity
32
The document outlines strategies for captive insurance for high net-worth clients, including an overview of captive insurance structures and domiciles. It discusses pure captives, group captives, rent-a-captives and protected cell captives. Key considerations for captive insurance include tax strategies under IRS revenue rulings and using captives for estate planning.
Musyarakah is an Islamic financing principle that involves a partnership between two or more parties to invest in a business venture. Profits are shared according to the partnership agreement, while losses are shared in proportion to capital contributions. There are various types of musyarakah partnerships depending on the roles of the partners. Musyarakah mutanaqisah allows a customer's capital share in a project to gradually increase over time through profit distributions and installment payments until full ownership is acquired.
The document summarizes an interview with Stewart Feldman about the benefits of forming a captive insurance company. Key points include:
- Captives allow business owners to insure risks not covered by traditional insurance and control rising costs.
- Mid-sized businesses with over $1 million in profits annually are good candidates for captives.
- Benefits include tax deductions, control over coverage, and potential profits from underwriting.
- Captives can be owned solely by a business or jointly and allow owners to choose specific risks to insure.
North Star Resource Group provides insurance, investment, retirement, financial planning, and business solutions. Their services include individual and group insurance, investment strategies with a broad range of options, fee-based financial plans, business insurance products, employee benefits, and education. They help with insurance needs analysis, retirement income planning, retirement plan distributions, tax planning, education funding, cash flow analysis, and more. North Star works with various partner companies to offer these solutions.
The document discusses the duty of utmost good faith in reinsurance contracts. It states that this duty requires high levels of honesty and disclosure between the ceding insurer and reinsurer. The ceding insurer must disclose all material facts to the reinsurer during contract formation and ongoing administration of the contract. The duty is mutual, so the reinsurer must also deal fairly with the ceding insurer. While some see it as a fiduciary duty, most courts treat it as a very high standard of good faith just below fiduciary duty. The requirements of the duty may be higher for treaty reinsurance, where the reinsurer relies more heavily on the ceding insurer.
The document summarizes several news stories:
1) A SEBI panel in India favors requiring acquirers in takeover deals to make an open offer for up to 100% of shares in the target company, rather than the current minimum of 20%. This could increase costs for acquirers but provide all shareholders an exit option.
2) AIG will pay $725 million to settle a long-running securities fraud class action lawsuit brought by three Ohio public pension funds over allegations of accounting fraud, bid-rigging, and stock price manipulation from 1999-2005.
3) An interview with Venugopal Dhoot discusses the future revenue and profit mix of his Videocon group, with oil and
Negotiating Venture Capital Term Sheets Joyce Chuang
This document summarizes key terms for negotiating venture capital financing. It discusses structuring the financing round and valuation, investor return mechanisms like liquidation preferences and dividends, control provisions including board composition and protective voting rights, liquidity events, and other standard investor rights and closing conditions. The overall summary is that the document outlines the major components that are negotiated in a venture capital term sheet to structure the financing round and define the rights and obligations of investors and the company going forward.
This document provides an overview of contract reviews and negotiations. It discusses key elements of contracts such as offers, acceptance, certainty of terms, and consideration. It also covers types of contracts, methods of contract formation, parties that can bind contracts, and important contract clauses to consider like limitations of liability, termination, intellectual property, and dispute resolution. The presentation emphasizes getting proper legal advice when entering contracts to avoid unnecessary legal risks and issues down the road.
M&A Law: The Lawyer's Role; Recent Delaware DevelopmentsStephen Bainbridge
A two-hour presentation on the role of the lawyer in the M&A team, the place of legal due diligence in the overall buyer side's due diligence process, and a review of recent Delaware M&A legal developments. I'm available to give it to your law firm, company, or group.
This document summarizes negotiating skills and techniques presented by Bart Greenberg. It discusses issues that can arise in negotiations such as unequal bargaining power between parties, personality issues between negotiators, and effective communication methods. Specific techniques are presented for dealing with difficult situations, including outsmarting opponents, staying within your means, and manipulating an opponent's greed. Examples are also provided to illustrate how these techniques can be applied.
Private Equity and Venture Capital Investment AgreementsJanice Lederman
The document summarizes key aspects of private equity and venture capital investment agreements. It discusses deal structures, essential term sheet elements, due diligence processes, equity purchase agreement terms, warrants, management equity, down-road financing issues and exit strategies. Specific issues covered include valuation, security attributes, representations and warranties, indemnities, remedies, collateral agreements and sample clause provisions.
Although the prohibition on taking of organizational opportunities is well established, the standards applied to this problem in corporate law disputes are vague and imprecise. Corporate directors and officers lack clear guidance as to when a business venture may be taken for themselves or must first be offered to the corporation. This article reviews the relevant Delaware case law, focusing on the ambiguities inherent therein. It then offers a proposed alternative regime, providing greater certainty and predictability.
The article then turns the question of why Delaware courts have resisted adopting a more determinate standard, such as the one offered here. It argues that — at least in this context — Delaware judges are concerned neither with maximizing the number of Delaware incorporations or promoting the interests of the Delaware bar. Instead, mandatory indeterminacy with respect to corporate opportunities is driven by the Delaware courts’ self-interest in maximizing their reputation.
How the Dodd-Frank Act Affects Practice in IdahoWendy Couture
The document discusses how the Dodd-Frank Act affects securities law practice in Idaho, including changes to the definition of accredited investor, exemptions for certain securities offerings, and a new "bad actor" disqualification preventing some with criminal histories from participating in private offerings. It also covers how the Act regulates financial professionals and affects public companies in certain areas like executive compensation and mine safety disclosures.
This document provides definitions for over 50 terms related to stocks, the stock market, and financial analysis. Some key terms defined include American Depository Receipts, which allow foreign stocks to trade in the US market, arbitrage which is the practice of exploiting price differences in the same security trading on different exchanges, and cash flow which refers to a company's net income plus non-cash expenses like depreciation. Additional terms defined include preferred stock, price-earnings ratios, technical analysis, warrants, and puts and calls which are options contracts.
Valuation Discounts for Holding Company: A Business Valuation ArticleCorporate Professionals
A holding company owns investments in other companies but has no business operations itself. Valuing a holding company is complex as its value is not simply the sum of its subsidiaries' values. Three common discounts apply: (1) liquidation discount for taxes on capital gains from selling subsidiaries, (2) lack of control discount as control level affects value, and (3) lack of marketability discount as restrictions exist on transferring subsidiary assets. Empirical research finds holding companies often trade at 40-60% discounts to net asset value. However, adjustments should be made depending on dividends received and expected future scenarios.
The document is a cheat sheet for hedge funds. It provides summaries of key information about hedge funds in 3 sentences or less:
1) The first page summarizes common characteristics of hedge funds, who invests in them, and why investors may choose hedge funds for diversification, downside protection, and an absolute return focus.
2) Page 2 defines differences between hedge funds and mutual funds, such as flexibility, paperwork requirements, liquidity, and an absolute vs. relative return focus. It also summarizes reasons to invest in hedge funds.
3) Page 3 summarizes common hedge fund fees including an annual management fee typically between 1-2% of assets and an incentive fee usually 20% of profits
principle of accounting lecture 1 .pdf how
and the allowance for doubtful account & depreciation and impairment
1. Accounts receivable are amounts owed by customers on account. Companies generally expect to collect these receivables within 30 to 60 days.
1. The document discusses various types of capital market instruments including secured premium notes, deep discount bonds, equity shares with detachable warrants, fully convertible debentures with interest, equipref shares, sweat equity shares, tracking stocks, disaster bonds, mortgage backed securities, and global depository receipts/American depository receipts.
2. It provides details on each type such as definitions, examples of companies that have issued certain instruments, and key features.
3. The purpose of the various instruments is to allow companies and governments to raise long-term funds from capital markets.
This document provides definitions and formulas for various types of financial ratios used to analyze a company's liquidity, capital structure, coverage, turnover/activity, and profitability.
It includes liquidity ratios like current ratio, quick ratio, and cash ratio to assess short-term solvency. Capital structure ratios like debt-equity ratio and capital gearing ratio indicate financing techniques and long-term solvency. Coverage ratios assess ability to serve fixed liabilities. Turnover/activity ratios measure efficiency of asset usage. Profitability ratios evaluate overall performance based on sales, assets, equity, and investment. Illustrations demonstrate computing ratios from financial statements.
This document discusses the key factors to consider when choosing a business entity, including liability, taxes, and management structure. The three most common types - partnerships, limited liability companies (LLCs), and corporations - each have distinct characteristics. Partnerships provide simplicity but no liability protection. LLCs offer liability protection while maintaining tax advantages of partnerships. Corporations provide complete liability protection but are more complex with additional taxes and formalities. The optimal choice depends on balancing these various advantages and disadvantages.
What is a Business Development Company (BDC)dcalaway
The document discusses ABC Corporation becoming a Business Development Company (BDC) to fund future growth. It provides an overview of what a BDC is, the benefits to investors and portfolio companies, how BDC's invest and are regulated, tax treatment, valuation of assets, management structures, and industry trends. Recent trends show the BDC model has proven resilient with dividend payments resuming and stock prices increasing for many companies.
- The document discusses creating or protecting value for clients in business transactions through consideration of the balance sheet. Specifically, it discusses enterprise value versus equity value, cash free/debt free offers, definitions of debt, and positioning these balance sheet factors in early negotiations.
- Key areas that can impact value and require interpretation are surplus assets, free cash, debt, working capital levels, and whether items like corporation tax are considered debt.
- Being prepared at the outset to include discussions of balance sheet factors can help position a client's interests when other parties may focus more on profits alone.
The document discusses three methods for owners to transfer their company to key employees:
1. A long-term installment sale where the employees promise to pay the agreed value to the owner over 7-10 years through installment payments.
2. A leveraged management buyout where the transaction draws on management resources, outside equity, and significant debt financing. This structure can reward key employees and position the company for growth while minimizing the owner's ongoing risk.
3. A modified buyout that uses both an installment sale and outside financing to affect the buyout, reducing the owner's risk compared to a standard installment sale. Outside financing is obtained through private equity firms who partner with management to create shareholder value.
The document discusses different types of business organizations including sole proprietorships, partnerships, corporations, franchises, cooperatives, and non-profits. It provides details on the characteristics, advantages, and disadvantages of each type. Specifically, it notes that sole proprietorships make up 72% of all businesses but only 5% of total profits. Partnerships allow for more capital and sharing of losses but also disagreements among partners. Corporations can raise more capital through stocks and bonds but are subject to more regulations. Franchises provide a proven business model but may impose too many restrictions. The document also provides statistics on the US business population and examples of different types of mergers.
Royalties may be a better method of financing for companies because:
1. They provide value for investors while maintaining simplicity for companies
2. No company ownership is sold, so current shareholders retain ownership percentages
3. Management control is maintained with no investor interference in business decisions or compensation plans
4. Royalties do not incur debt for companies
This document summarizes key terms related to a preferred stock financing. It discusses warrant terms, offering size and valuation, liquidation preferences, participation rights, and conversion rights. The main points covered are:
- Warrants may be issued with bridge loans or preferred stock financings and allow the holder to purchase shares at a set exercise price.
- The term sheet will specify the pre-money valuation, number of shares sold, and whether warrants are included.
- Liquidation preferences typically return the purchase price to investors first and are often 1-2x the purchase price. Participating preferred may share residual proceeds.
- Conversion rights allow preferred stock to convert to common stock, usually automatically upon an
This document provides a summary of collateralized debt obligations (CDOs) written for a summer intern. It describes what CDOs are, how they are structured with different tranches, their purpose and types. Key points include:
1) CDOs raise money by issuing bonds and invest the proceeds in a portfolio of bonds, loans or assets to repay their securities. Payments from the portfolio are used to repay the CDO's bonds.
2) CDOs are structured with multiple tranches or classes of securities with different levels of seniority and risk. Higher rated senior tranches are protected from losses first.
3) CDOs allow investment firms to increase assets under management and banks
The document discusses the JOBS Act and its provisions for crowdfunding and raising capital. It allows small businesses and startups to raise up to $1 million from online investments. Medium and larger firms can raise up to $50 million annually. The SEC must also reach out to women and minority-owned firms. Crowdfunding will have a disruptive impact by providing financing options for difficult to finance small businesses. However, many requirements and details still need to be addressed, such as standards for financial disclosures and investor education. Platforms will also need to register and help manage the crowdfunding process to facilitate these small business investments.
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Small business owners facing economic difficulties may consider laying off employees as a way to cut payroll expenses. However, layoffs are difficult for both workers and owners. Owners should first determine if layoffs are truly necessary by exploring other cost-cutting options or obtaining new financing. If layoffs are unavoidable, owners should consider their business needs carefully, comply with all labor laws, and seek legal advice before terminating any employees.
The document discusses various types of corporate bonds, features of preferred stock, differences between leasing and purchasing assets, and accounting treatment of operating and capital leases. Key topics include bond indenture provisions, bond ratings, types of bonds including convertible and mortgage bonds, risks associated with different bonds, and balance sheet treatment of capital versus operating leases.
This document defines over 200 financial terms from A to Z. It provides concise definitions for common terms used in finance and investing such as weighted average cost of capital (WACC), warrants, wash sales, and working capital. The definitions are organized alphabetically to allow readers to easily find explanations for specific terms.
Similar to Model Term Sheet For Alliance Of Angels Final (20)
2. Investor Incentives Investors who invest by the Closing Date will receive the
following incentive:
Discount or
Warrants 25% Warrant Coverage Comment [DR4]: Discounts or Warrants are an
incentive to invest. If granted, it is almost always
one or the other, but not both. They must be
considered with the price per share as to their
Stock Options The company will increase the authorized pool of options prior reasonableness to current market conditions. It is,
of course, cleaner to just lower the price per share,
to the financing to bring the total unallocated options to at but often there are reasons (e.g. a higher priced
least the following percent friends and family round) not to do so.
Comment [DR5]: With warrant coverage, the
Total Unallocated 24% in the post money post money will technically be higher than the pre‐
money plus the amount invested, because these
options shares are issued. In reality, given that the warrants
are usually priced the same as the shares issued,
they are “out of the money” and therefore do not
New options issued 200,000 actually effect the post money.
Comment [DR6]: The unallocated option pool
depends largely on the state of the company’s
current management team and positions that still
need to be filled. This usually ranges from about
Pre and Post‐Financing Capitalization (assuming all shares issued) 10% to 25%, and must be considered in the post‐
money cap table, not the pre‐money cap table.
Pre‐Financing Post Financing
Type of stock Number of % Fully Number of % Fully
shares Diluted shares Diluted
Common 1,000,000 51% 1,000,000 35%
Stock Options
Granted 250,000 13% 250,000 9%
Pre‐financing
Stock Options
Avail 500,000 26% 500,000 17%
New Stock
Options 200,000 10% 200,000 7%
Series A Pfd Stock 731,250 26%
Warrants 182,813 6%
Total Shares 1,950,000 100% 2,864,063 100% Comment [DR7]: Note that the post money
price is more than the pre‐money + new money,
because of the warrants, which go into the post.
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3.
Terms of the Series A Stock
Liquidation 1x participating preferred. The Series A Preferred shall receive an amount Comment [DR8]: In the past, it was often
argued that Angels should not request 1x
Preference equal to one times (1x) the Purchase Price, plus any declared and unpaid participating preferred without a cap, because
dividends, prior to the payment of any sums to any other equity security larger follow‐on rounds would then get the same.
While a small angel round doesn’t change the
holders in the event of (i) a liquidation, dissolution, or winding up of the “liquidation overhang,” a large VC round might.
Company; or (ii) “Change in Control,” which means a merger or Capping the liquidation preference in future, larger
rounds does make sense.
consolidation (other than one in which the stockholders of the Company
own a majority by voting power of the outstanding shares of the surviving
or acquiring corporation) and a sale, lease, transfer, or other disposition of
all or substantially all of the assets of the Company. Thereafter, all of the
proceeds shall be ratably distributed to the holders of Preferred and
Common Stock, on an as converted basis.
Dividends Dividends only when declared, and not cumulative. The holders of Series A Comment [DR9]: Cumulative dividends do make
sense in the case of a redemption provision, as
Preferred will be entitled to receive dividends only when and if declared by outlined below.
the Board and in preference to holders of Common Stock.
Voting Rights Except as set forth in “Protective Provisions” below, the Series A Preferred
shall vote together with the Common Stock on an as converted to Common
Stock basis, and not as a separate class
Board The holders of a majority of the Series A Preferred shall be entitled to elect
Participation one member of the board of directors, who shall initially be ________. At
the time of the closing of this financing, the board of directors shall be 5 Comment [DR10]: Depending on the
circumstances, having all of the directors selected
members: 1 from management, 1 from Series A, and 3 independent by the closing might not be possible. This could
directors acceptable to both common and Series A directors. The Series A read that within XXX days of closing, with the
agreement of the Series A director, this can be
director shall be compensated with stock options on a standard basis. delayed.
Comment [DR11]: Note that five is an arbitrary
number and should be adjusted to the
D&O Prior to the closing, the company shall obtain a Directors & Officers circumstances. The goal is to provide excellent
guidance to the entrepreneur and bring the
Insurance insurance policy that is at least $1M. investors’ knowledge to bear. Often an initial board
of 3 is sufficient.
Comment [DR12]: It is also reasonable that the
Series A director be on compensation committee
and must agree to executive compensation.
Comment [DR13]: This amount is a minimum,
but generally adequate for a seed stage company. If
there is a large amount of investment, real property,
or intellectual property, it should be more.
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4. Conversion The holders of the Series A Preferred shall have the right to convert the
Rights Series A Preferred into shares of Common Stock at any time. The initial
conversion rate for the Series A Preferred shall be 1‐for‐1, subject to
adjustment as indicated below.
Automatic The Series A Preferred shall automatically be converted into Common Stock,
Conversion at the then applicable conversion rate, upon: (i) the closing of a firmly
underwritten public offering of not less than $25,000,000 (before payment
of underwriters’ discounts and commissions) (a “Qualified IPO); or (ii) the
written consent of holders of the majority of the outstanding preferred
stock.
Antidilution Broad based weighted average. The conversion price of the Series A
Rights Preferred will be subject to proportional adjustment for stock splits, stock
dividends, and the like, and to adjustment on a broad‐based weighted
average basis for issuances at a purchase price less than the then‐effective
conversion price, subject to customary exclusions.
Founder's Common stock owned by any founder with more than 2% of the post Comment [DR14]: This percentage can be
modulated depending on the circumstances; 2‐10%
Stock Right of financing equity is subject to the right of repurchase by the company at the is the reasonable range..
Repurchase lower of (a) the fair market value (FMV) at the time of agreement or the Comment [DR15]: This is an important term
FMV at the time of repurchase; or (b) $0.01 per share (if no FMV has been that is often missing in Angel term sheets. In
essence, it converts the founders shares to
determined), if the founder leaves the company within the first four years. restricted shares. Having 100% of the founders’
Such a right expires over four years on a monthly basis after the Initial shares subject to right of repurchase is a term that
can be negotiated. Depending on the state of the
Closing (2.083% per month for 48 months). company and the value contributed to date, and the
value of the founder to the company, this number
can be set at less than 100%. However, sufficient
shares should be subject to this right to ensure that
Protective The consent of the holders of a majority of the outstanding Series A the founders are bound to the company.
Provisions Preferred shall be required to: (i) amend the Articles of Incorporation in a Note that sometimes the founders have invested
manner that would alter, change, or repeal any of the rights, preferences, capital as well as sweat equity. In those cases, the
“purchased shares” should be excluded from this
privileges or restrictions of the Series A Preferred so as to adversely affect provision.
the Series A Preferred (it being understood that the authorization or
issuance of shares of a new series of preferred stock that is senior to or pari
passu with the Series A Preferred will not be deemed to adversely affect the
Series A Preferred if the rights, preferences, privileges or restrictions of the
Series A Preferred are not otherwise affected); (ii) increase the total
number of authorized shares of Series A Preferred by more than 10%; (iii)
approve a sale or merger of the Company.
Comment [DR17]: Some favor a 60% or 2/3rd
vote. While more protective of investors, it can put
Drag Along If the Company’s Board of Directors and a majority‐in‐interest of the a company into a position where it can’t move
forward.
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5. Rights holders of Series A Preferred and Common approve a Change of Control Comment [DR16]: In order to ensure flexibility
and rapid decision making, once a majority of the
Transaction or issuing New Securities, each Holder agrees (i) to vote all common and preferred A shareholders agree to a
shares held by such Holder in favor of such Change of Control Transaction decision, getting the others to agree is a
meaningless exercise. So, notification, rather than
or issuing New Securities, and (ii) to sell or exchange all shares of Common the complete vote is all that is required. This term
Stock then held by such Holder pursuant to the terms and conditions of can be important in WA law, where if not otherwise
specified, the number is 2/3 and not a simple
such a transaction. majority.
Registration The holders of Series A Preferred will be entitled to receive registration
Rights rights pari passu with and substantially the same as any registration rights
granted to holders of equity securities of the Company in the next round of
financing of the Company.
Rights of First Keep pro rata share. Each Investor who purchases at least $25,000 of
Offer Series A Preferred will have a right of first offer, subject to certain
limitations, to purchase its pro rata portion of any new equity securities
offered by the Company, subject to standard exclusions. The right of first
offer will terminate immediately prior to the earliest to occur of: (i) the
Company’s initial public offering; (ii) such time as the Company otherwise
becomes subject to the reporting provisions of the Securities and Exchange
Act of 1934, as amended; or (ii) a Change in Control. This right expires for
any investor who does not exercise this right at each opportunity.
Proprietary The Company will cause each person previously, now, or hereafter
Information and employed or engaged as a consultant to enter into an acceptable
Inventions proprietary information and inventions agreement.
Agreements
Information The Company will share with the <<AoA Investors>> (i) audited annual Comment [DR19]: Audits can be expensive,
especially for a company that is early in its
Rights financial statements no later than 90 days after the end of each fiscal year, development. It is OK to allow the board to waive
(ii) unaudited quarterly financial statements no later than 45 days after the this requirement for a period of time.
end of each quarter and a comparison of such quarter's results with the Comment [DR18]: Best practice is that the
Company CEO sends out a quarterly letter or holds a
results projected by the Company's annual budget, (iii) unaudited monthly meeting with investors at least quarterly to update
financial statements no later than 30 days after the end of each month and them on progress, plans, and future financings.
General rule – no surprises.
a comparison of such quarter's results with the results projected by the
Comment [DR20]: Some favor making this 120
Company's annual budget, and (iv) an annual budget for the upcoming fiscal days to save money.
year promptly following approval by the Board. <<AoA Investors>> will be
entitled to standard rights to inspect the properties and the books and
records of the Company at reasonable times and upon reasonable notice to
the Company. The obligation of the Company to furnish such information
and to permit such inspection will terminate at the earliest of such time as
the Company consummates a Qualified IPO, becomes subject to the
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6. reporting provisions of the Securities Exchange Act of 1934, as amended, or
the closing of a Change of Control.
Investor’s Company agrees to pay $5,000 (or $5,000 per each $1M, or fraction
Counsel thereof, raised) for Investors’ Counsel expenses to review this term sheet
and ensure that the final agreement reflects the terms agreed.
Redemption After five years, if not previously converted, the Series A Preferred Stock is
Rights (used only to be redeemed in three equal successive annual installments beginning Comment [DR21]: This is a term that is
if the Company is <<Date>>. Redemption will be at the purchase price plus a <<4‐12%>>% per particularly useful for an Angel deal, where capital
requirements are low and anticipated cash flow
annum cumulative return.
or might be a might be high. In those cases, the entrepreneurs
might choose to award themselves high salaries and
“lifestyle bonuses, stripping the company of cash (which
business”) could go to dividends) and find that a sale is less
attractive. The investors need a mechanism to force
this issue.
In growth investments, this kind of hammer might
Due Diligence The transactions contemplated by this Term Sheet are subject to the cause the company to not invest in growth to
satisfactory completion of due diligence by each Investor. ensure that they can meet the redemption
provision, so it must be used carefully.
Expiration of This letter expires at 5 p.m., Pacific Daylight Time, <<Date>>, unless the Comment [DR22]: This percentage needs to be
adjusted for the circumstances. It needs to be
Letter: Company executes it below and returns an original or faxed executed sufficient to give the investor a reasonable return, if
version to <<AoA Investors>> by that time. the entrepreneur wants to maintain the business as
a “lifestyle business,” but not so high as to make the
company ill‐liquid.
Exclusivity: From the date of acceptance of this Memorandum of Terms until the Comment [DR23]: This provision is not
generally recommended nor necessary. This is not
earliest to occur of (a) consummation of the financing, (b) the formal generally part of an angel term sheet, but some
termination of negotiation by both <<AoA Investors>> and Company or (c) more sophisticated Angels do not want their terms
“shopped” to others. It is included for
<<Date>>, the Company will not directly or indirectly solicit, initiate or completeness.
participate in any discussions or negotiations with, or encourage or respond
to any inquiries or proposals by any persons, company or group other than
the Investors, concerning any financing or sale of the Company without
prior approval of <<AoA Investors>>. The Company will promptly notify
<<AoA Investors>> if any person, company or group seeks to initiate any
other discussions or negotiations and contemplated in the immediately
preceding paragraph, makes any proposal or inquiry, or requests any
information with respect to any proposed financing or sale of the Company.
Confidentiality: This term sheet is confidential to the parties and is for the use of the
Company’s management and their advisors. Accordingly, the information
contained in this document may not be disclosed to any third party or used
to facilitate negotiations with any third party without <<AoA Investor>>’s
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7. and the Company’s prior approval.
Not an Offer This Term Sheet is not a complete description of the financing and does not
constitute either an offer to sell or an offer to purchase securities.
On Behalf of the Company: On Behalf of the Investors:
__________________________________ __________________________________
Name of Company Investor Group (if applicable)
__________________________________ __________________________________
Signature Signature
__________________________________ __________________________________
Name Name
__________________________________ __________________________________
Phone Phone
__________________________________ __________________________________
Email Email
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