Term Sheets

Another Way VCs Outnegotiate Entrepreneurs

Jeff Bussgang from Flybridge has today’s great VC post titled In VC deals, Price Doesn’t Matter – But The "Promote" Does.  While I personally dislike the phrase “promote” to describe the concept Jeff is describing (I think “founders post-deal ownership value” – or FPDOV – is a much better phrase, although I realize “promote” is…

Model Seed Documents – Direct From Techstars

Today, our friends at Techstars posted their model forms of seed financing documents. Techstars worked with Brad, myself and very closely with Cooley Godward Kronish, LLP (and specifically Mike Platt) to put together a set of “Model Seed Funding Documents” that anyone can use. There are five primary documents in the set: Term Sheet Articles…

What Price Adjustments Do You See Prior To Closing In A Financing?

Q:  Can you please explain what sort of adjustments you should expect to the price that a VC promises in a term sheet between the signing of the term sheet and signing of a final stock purchase agreement (SPA)? A: (Jason)  To answer your question, we first need to determine what the definition of "price"…

Founders Termination Clause In Term Sheets?

Q: Thank you very much for your term sheet series.  Not being that familiar with "specific" term sheets, I have heard something about VC terms that effectively allow the VC to fire the founder(s) and in the process relieve them of their shares since they had then left the company before liquidity. I have read…

Term Sheet Glossary

Gigaom’s FoundRead has today’s great post up titled F|R Crib Sheet: The Term Sheet Glossary guest written by Jay Parkhill.  While you can always entertain yourself for hours with the Term Sheet Series that Jason and I wrote several years ago, sometimes a crib sheet will suffice.

Term Sheet for an LLC vs. a Corporation

Q: We have an interested Angel for an investment in our startup LLC. We have a strong lawyer for support. We’d like to submit a draft Term Sheet to, as you say in your blog, “control the paper”. Everything I find online about Angel Term Sheets contemplates shares, which presumes a corporation (vs. an LLC)….

What are Supra Pro-Rata Rights?

Q: Can you explain what supra pro-rata is? It seems to be showing up in some VC term sheets now. What’s the impact on the entrepreneur? How hard should one try to negotiate it out? If a VC insists on this term, should the entrepreneur walk away? A:  (Jason)  First of all, for those of…

Venture Capital / Lawyer Term Sheet Humor

Last week I attended a dinner put on by Ed Zimmerman and the fine folks at Lowenstein Sandler.  Ed has been an active participant in the NVCA model documents initiative and I’ve gotten to know him through the years as someone who is passionate about what he does, which among other things, is law and…

Do Venture Capitalist Ever Use Their Redemption Rights?

Q: Have you experienced a company which grows along nicely, but does not offer a liquidity event? In the funding agreement, there is a clause for redemption rights. Is this used so that the VC can get out of the investment? A: (Jason). Yes, we’ve experienced companies growing nicely without liquidity events. And yes, we…