Tag: Term Sheet
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Top 5 Worst Seed Round Terms For Startups
Here’s a list of the top 5 worst seed round terms that cause harm to startups at the seed financing stage and therefore should be avoided: 5. Control “Control” of a startup can manifest itself in various forms such as equal (or investor-favorable) representation on the board of directors or a requirement of obtaining seed…
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How to Evaluate a Startup Accelerator Offer
Great news — your startup just got accepted to an accelerator! But before your startup signs up and cashes that $[25,000] check, your startup’s co-founders should sit down and evaluate the accelerator offer. The following are some issues to consider and actions to take before accepting an the accelerator offer: (1) Calculate Valuation and Determine…
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Term Sheet Purgatory
There’s a lot of advice about (1) how to attract VCs, and (2) how to negotiate a venture capital term sheet. Both sets of advice tend to ignore the gap between an investor’s expression of investment interest and your startup’s receipt of the term sheet. I refer to this waiting period as “term sheet purgatory.”…
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Convertible Note Term Sheets
Just like the preferred equity financing process, the convertible debt financing process can start with a term sheet, rather than a full set of financing documents. A convertible note term sheet is beneficial because it postpones a lawyer from cranking out a full set of docs until consensus is reached regarding the convertible debt offering’s…
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Is a Term Sheet Binding?
A term sheet is an outline of the deal terms that helps frame the contemplated transaction for both parties. Term Sheets for financings and acquisitions are usually not binding. However, it is quite common to see various sections of the term sheet binding, including: –No Shop or Go Shop Clauses: Can a party shop the…
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What is a Liquidation Preference?
The liquidation preference is the amount that must be paid to the preferred stock holders before distributions may be made to common stock holders. The liquidation preference is payable on either a liquidation of the company, asset sale, merger, consolidation or any other reorganization resulting in the change of control of the startup. It is…
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WSGR Launches Term Sheet Generator
I just found out from Altgate.com that Wilson Sonsini has launched a “Term Sheet Generator.” Here is WSGR’s description of the free tool: This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This…
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I Got a Term Sheet, Now What?
Getting a term sheet from an investor is like getting an invitation to the Prom in January–you’ve got a long way to go before you dance. When you get a term sheet from a VC or angel investor, you need to decide whether the economics of the deal feel right. And you also have to…
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Don’t Be Coy With a Letter of Intent
I recently worked on a deal where the prospective seller over-strategized the letter of intent. The seller wanted my client to sign a non-binding LOI that contained about half of what should have been included in the letter. It was extremely frustrating and ultimately was a waste of time, because rather than acquiesce to the…