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StartupTalk #38 Part 1
- 2. PreSeed Ventures Legal Director +45 25245100 jhj@preseedventures.dk Work Experience: • Legal Director, PreSeed Ventures • Partner, LegalHero • Attorney-at-law, Lundgrens Lawfirm • Attorney-at-law, Bruun & Hjejle Lawfirm • Junior Associate, Bech-Bruun Lawfirm Education: • Master of Laws, University of Copenhagen, University of Fordham, School of Law and London School of Economics and Political Science Jonatan Hjortdal StartupTalk #38 – Term Sheet 2
- 3. PreSeed Ventures << << << The Fundraising Process StartupTalk #38 – Term Sheet 3 Pitch Deck + Prepare how to run your funding process Meet the investors + Team Term Sheet + Due Dilligence
- 4. PreSeed Ventures StartupTalk #38 – Term Sheet 4 01 Term Sheets – what & why 02 What to look for in a Term Sheet 03 Understand the intentions of a VC Agenda
- 5. PreSeed Ventures StartupTalk #38 – Term Sheet 5 01 Term Sheets – what & why 02 What to look for in a Term Sheet 03 Understand the intentions of VC Agenda
- 6. PreSeed Ventures o A term sheet is legally a nonbinding document. o The term sheet is usually produced by the VC financing the company. o When the investment round has multiple investors, producing the term sheet is normally the responsibility of the lead investor. o Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up. In venture these documents (also referred to as “long forms” or “long form documents” are usually an investment agreement and a shareholder’s agreement. o Even tough the TS is not legally binding your word and good reputation is on the line – this means that it is generally considered inappropriate to try negotiating on something already agreed upon in the TS. o The document that contains all financial and legal main terms for the investment. o You’d want a term sheet (or several as the case may be) as it means someone intends to invest in your startup! StartupTalk #38 – Term Sheet 6 What is a Term Sheet and why do I need it?
- 7. PreSeed Ventures StartupTalk #38 – Term Sheet 7 01 Term Sheets – what & why 02 What to look for in a Term Sheet 03 Understand the intentions of a VC Agenda
- 8. PreSeed Ventures Make sure you understand ALL the terms of a term sheet! StartupTalk #38 – Term Sheet 8 Pre-emption rigths A VC will require pre-emption rights in order to maintain target ownership. Warrant pool / ownership fully- diluted vs. non- diluted In order to make it easy to attract talented employees a warrant pool needs to be allocated. Founder lock- up VC’s invest in the team! As such, we are locking you – the founders - up in the company to secure our investment. Key Person Clause Goes hand-in-hand with the lock-up - our way to secure that you do not leave the company after we invested. Tag along / drag along Tag along: If you sell, we can co-sell. Drag along: If majority wants to sell, the majority can force the minority to co-sell on similar terms. Investor information rights Establishment of a board typically comes with a VC – we require information and reporting to be able to track your performance.
- 9. PreSeed Ventures StartupTalk #38 – Term Sheet 9 01 Term Sheets – what & why 02 What to look for in a Term Sheet 03 Understand the intentions of a VC Agenda
- 10. PreSeed Ventures Understanding the intentions of a VC StartupTalk #38 – Term Sheet 10
- 11. PreSeed Ventures Understanding the intentions of a VC StartupTalk #38 – Term Sheet 11 o Negotiating a TS is typically our first encounter – we want to get qualified push back; we want you to challenge us where it makes sense! o How you negotiate the TS is a part of our assessment of you. o One thing is terms. Another thing is understanding where a VC is coming from. o Do your homework – understand why a VC require the terms, they do. o Understand the venture journey and the VC model! o VCs – especially early stages VCs – invest in you as a team. Without you, the investment is simply not the same worth. o VCs are not looking to exit your company for 2x their investment.
- 12. PreSeed Ventures Don’t be shy. Hit us up with your most honest, thorough, proud and personal pitch deck. That's the only way we can assess if we're the right ones to help you. PSVMaster.pptx 12