Uploaded byVitavin Ittipanuvat
Term Sheet Demystified [Startup Thailand 2018]
The document discusses the key elements and purpose of term sheets in venture capital transactions in Thailand, emphasizing the importance of mutual understanding between founders and investors. It outlines the fundraising journey and the different roles of founders and investors during the process, as well as common questions regarding legal aspects and negotiation. Additionally, it provides take-away tips for creating effective VC relationships and avoiding pitfalls in valuation and negotiation.
Term Sheet Demystified [Startup Thailand 2018]
- 1. Term Sheet Demystified: ThailandVenture Deals May 19, 2018 TERM SHEET DEMYSTIFIED @STARTUP THAILAND 2018 MAY 19, 2018
- 2. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 About Vitavin Ittipanuvat Senior Investment Manager Beacon Venture Capital Pongwut Ittipoonsawat Senior Associate InVent Some facts about us: • software engineers by training, know the beauty of software and why it’s eating the world • 1st-gen VC, learned & grew with Thailand’s pioneer venture fund since 2014 • 10+ investments, mostly as the lead investor, including companies in TH, SG & US
- 3. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Startup Game: Two Sides of the Table Founder Investor Build VENTURING Identify FINANCING Find Fund Lead RAPID VALUE CREATION Support + = Return: to self & VCs Return: to self & LPs
- 4. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor
- 5. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor • Provide answers • Provide data • Run company • Ask questions • Request data • Do diligence • Offer/Structure deal • Negotiate terms • Negotiate terms • Run company • Provide more answers • Provide more data • Fulfill C.P. • Run company • Ask more questions • Request more data • Structure/Close deal BUSINESS DUE DILIGENCE FINAL DUE DILIGENCE
- 6. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor • Provide answers • Provide data • Run company • Ask questions • Request data • Do diligence • Offer/Structure deal • Negotiate terms • Negotiate terms • Run company • Provide more answers • Provide more data • Fulfill C.P. • Run company • Ask more questions • Request more data • Structure/Close deal BUSINESS DUE DILIGENCE FINAL DUE DILIGENCE
- 7. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor • Provide answers • Provide data • Run company • Ask questions • Request data • Do diligence • Offer/Structure deal • Negotiate terms • Negotiate terms • Run company • Provide more answers • Provide more data • Fulfill C.P. • Run company • Ask more questions • Request more data • Structure/Close deal BUSINESS DUE DILIGENCE FINAL DUE DILIGENCE 90%< 5%
- 8. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor EXIT (OR WIND UP)
- 9. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor EXIT months years THE ROLLER COASTER (WIND UP) (WIND UP) (WIND UP) (WIND UP)
- 10. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Fundraising Journey: Two Sides of the Table TERM SHEET CLOSINGSCREENING Founder Investor EXIT What you experience here will mostly define there months years THE ROLLER COASTER (WIND UP) (WIND UP) (WIND UP) (WIND UP)
- 11. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Term Sheet: Purpose & Nature • The term sheet’s objective is to outline the key terms of an investment for mutual understanding between the founders and the investors. > Definitive agreements (e.g., shareholders agreement and share subscription agreement) that define the actual terms will be negotiated and executed later based on the term sheet. • Despite most term sheets look like a contract to invest in every way, they are not a legal promise to invest. > Generally only the confidentiality and no-shop provisions are the binding clauses once the signatures are completed. • Level of details can vary a lot depending on the investor > However, avoid too broad or incomplete term sheets issued early just to lock-up the deal.
- 12. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Term Sheet: Key Elements ECONOMIC CONTROL • Valuation • Investment Amount • Pre-emptive Right • Right of First Refusal • Anti-dilution • Tag-Along • Liquidation Preference • Board of Directors • Lock-up Period/Vesting • Reserved Matters • Information Rights • Drag-Along
- 13. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Term Sheet: Walkthrough
- 14. TERM SHEET DEMYSTIFIED@STARTUP THAILAND 2018 MAY 19, 2018 The Term Sheet: Common Vocab EXPLODING TERM SHEET PULLING THE TERM SHEET $X ON $Y
- 15. Questions? 1) Do foundersneed a lawyer? 2) Is a separate NDA needed? 3) How much detailed should the term sheet be? 4) Should VC pay for the legal expenses? 5) Can founders change their mind after the term sheet is signed? 6) What are the remaining risks after the term sheet is signed? 7) ……………………………………………………………………………… TERM SHEET DEMYSTIFIED @STARTUP THAILAND 2018 MAY 19, 2018
- 16. Take-Away Tips • Valuationis not everything – avoid a zero-sum game • Follow the etiquette – reputation follows a person for a life time • Be considerate & honest – VC relationship is long, make it an enjoyable one TERM SHEET DEMYSTIFIED @STARTUP THAILAND 2018 MAY 19, 2018 TVCA.OR.TH THAILANDTECHSTARTUP.ORG