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Understanding Angel and Venture Term Sheets


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Understanding Angel and Venture Term Sheets at Bingham McCutchen with Jason Rodriguez and Will Perkins

This limited seat luncheon brings some of Boston’s most experienced attorneys to provide 2 hours of deep instruction to entrepreneurs struggling to understand the complexity of high growth investments. Sample terms sheets will be provided and analyzed.

Working lunch programs are hosted by TCN’s professional service sponsors to provide tactical level information designed to accelerate the fundraising process.

Published in: Economy & Finance, Business
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Understanding Angel and Venture Term Sheets

  1. 1. Understanding Angel and Venture Term Sheets: William Perkins, Partner Jason Rodriguez, CounselAugust 15, 2013 A Play in Three Acts
  2. 2. CAST & SETTING CAST Entrepreneur..................................................................Jason Rodriguez Jason, an engineer by training, spent many years in the labs of a large technology company. He is now leading a group of his former work colleagues into a new tech start-up. Having spotted the growing interest in electric cars, Jason and his team have developed a product that sits between the power source (i.e., wall plug) and the car charging port that speeds charge times by 30%-50% (in early lab tests of a crude prototype). SpeedyCharge needs $500-750,000 to develop a beta version of the product and place it with a local electric car club who have signed on to beta test it. Angel Investor........................................................................ Will Perkins Will, a lawyer by training, now spends his time investing in early-stage growth companies as an angel and, together with his group of old friends, functions almost as an angel fund. SETTING Having been introduced through a mutual connection, Jason and Will are meeting in person for the first time at a local craft beer hall to discuss and negotiate terms for an angel investment round led by Will. Prior to this meeting, Jason and Will had a long “meeting” via teleconference where Jason walked Will through SpeedyCharge’s pitch deck and his business model. Will showed a willingness to invest, but Will wanted to meet in person to negotiate terms.
  3. 3. ACT I Will and Jason meet at The Beer Hall and jump right into their negotiation. Things quickly turn to valuation... Key Terms* • LLC ❒ • Corporation ❒ • Founders ❒ • Valuation ❒ • Cap Table ❒ • Pre-money ❒ • Post-Money ❒ • Convertible Notes ❒ • Preferred Stock ❒ *Engineered for Term Bingo! Play along...
  4. 4. ACT II With valuation and the structure set, Will and Jason turn to other terms and topics... Key Terms • Option Pool ❒ • Vesting ❒ • Participating preferred ❒ • Dividends ❒ • Anti-dilution ❒ • Weighted-average ❒ • Full ratchet ❒ • Pre-emptive rights ❒ • Blocking rights ❒ • Protective provisions ❒ • ROFR ❒ • Co-sale ❒ • Drag ❒
  5. 5. ACT III Things are wrapping up... Key Terms • Board seat ❒ • Observer ❒ • Information rights ❒ • Timing ❒ • Drafting ❒ • Counsel ❒ • Expenses ❒
  6. 6. Other Resources • The National Venture Capital Association’s “‘template’ set of model legal documents for venture capital investments” are available at: • Series Seed documents are designed to simply seed rounds and are almost “venture- lite” documents. They are available at: • The model documents, while instructive and prepared with some helpful annotations, are no substitute for a thorough discussion/translation by your own counsel
  7. 7. Bingham Offices
  8. 8. Why Bingham for Emerging Growth Companies? • Recognized as having a National Tier 1 Venture Capital Practice for 2013 by Best Lawyers/U.S News and World Report • Regularly refer prospective investment opportunities to our venture capital clients and contacts • International funds experience • Clients rely on us not only for legal advice but also for a reasonable, practical approach • Extensive corporate and operational experience • We bring the “A Team” • No “bait and switch” • Focus on value added, cost-effective services
  9. 9. • Bingham has extensive experience representing early stage companies in: • Formation • Financing • Licensing and technology transfer • Patent strategy and prosecution • Commercial contracts • Equity plans • We also represent venture capital funds in: • Organizational matters • Negotiating and documenting their investments in portfolio companies • Representing clients in multiple rounds of preferred stock and other financings • Investing in “seed” stage, mid-stage and later-stage companies Why Bingham for Emerging Growth Companies?
  10. 10. Representative Venture and Emerging Growth Company Clients
  11. 11. Representative Technology Clients
  12. 12. Helping Companies Through Their Lifecycle Formation Financing IPO Sale
  13. 13. What People are Saying about Us... Recognized by Chambers USA as having a “‘stellar’ corporate team” that produces “work of an ‘extremely high quality’” as well as noted for having “broad geographical client reach” -Chambers USA "The 'strong middle-market M&A practice' at Bingham McCutchen LLP impresses in terms of strength and depth, with experience in a variety of industries across diverse geographies.” -Legal 500 Recognized as having National Tier 1 Venture Capital and Technology Practices - US News and World Report and Best Lawyers " They're extremely efficient, analytical and strategic. Very good at distilling the legal matters and separating the business matters. They don't create barriers to getting deals done." -Chambers USA
  14. 14. Will Perkins Will Perkins concentrates his practice on general corporate matters and licensing matters, with an emphasis on strategic investments, mergers and acquisitions, structuring and financing new ventures, and public and private offerings of securities, including representation of both financial and strategic buyers. He represents both public and private companies, as well as private equity funds, in a wide range of transactions including venture capital financings; in-licensing and out-licensing transactions; product manufacturing and distribution arrangements and initial public offerings and follow-on public offerings of equity and debt securities. Jason Rodriguez Jason Rodriguez advises public, private and emerging companies on a broad range of corporate matters with a focus on venture capital transactions, mergers and acquisitions, joint venture transactions, licensing transactions, and equity and debt financings. His work covers various industries, including telecommunications, life sciences, high technology, Internet services, broadcasting, software and publishing. .
  15. 15. William S. Perkins Partner 617-951-8574 Thank You and Good Luck! Jason Rodriguez Counsel 617-951-8182