Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal. As with so many subjects in law and finance, mastering the jargon is half the battle.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Gust

OCTOBER 26, 2011

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. The Note Purchase Agreement and Convertible Promissory Note are essential documents for any convertible note financing.

Finance 79

Finance Term Sheet Covenant Accredited Investor 79

Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. Suppose the notes converted as if the acquisition were an eligible financing round.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

NOVEMBER 13, 2014

Kara has worked in finance in Boston, NYC and Silicon Valley. In Kara’s case I got to see her work on deal structuring first hand having worked closely with her on her board at P.S. XO. As a result we need somebody well networked into these communities already. She has been in operations in Seattle and Los Angeles.

Partner 408

Partner Las Vegas Los Angeles Baltimore 408

Startup Professionals Musings

JANUARY 27, 2012

It’s true that Angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. But due diligence and paperwork take time, and can change everything.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 223

Startup Professionals Musings

SEPTEMBER 14, 2010

It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. But due diligence and paperwork take time, and can change everything.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Berkonomics

MAY 15, 2014

Just a few of these terms include vesting, corporate structure, governance principles, financing strategy, valuation and exit strategy. As an example, twenty five years ago, most VCs used common share deal structures. It was not until the later 1980s that the preferred share structure became popular.

Term Sheet 91

Term Sheet Angel Groups Angel Investor Deal Structure 91

Scott Edward Walker

FEBRUARY 9, 2020

It matters because, unless you understand the motivation of a prospective buyer, it will be very difficult to make informed decisions with respect to critical deal issues. How Is the Deal Structure Different with a Financial Buyer? If you have never done a deal with a financial buyer, you are in for a rude awakening.

Private Equity 59

Private Equity New York City Equity Deal Structure 59

View from Seed

OCTOBER 21, 2014

Sharing these pricing expectations early with potential lead investors fundamentally qualifies your conversations, but it also runs the risk of prematurely losing a potential financing partner, or else it can reduce options to maximize your fundraise outcome.

Valuation 336

Valuation Founder Seed Stage Angel Investor 336

Gust

OCTOBER 17, 2011

It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Due diligence and paperwork take time, and can change everything.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 158

Genuine VC

JULY 30, 2012

Sharing these expectations early in potential lead investor discussions fundamentally qualifies the conversations, but it also runs the risk of prematurely losing a potential financing partner or reducing options to maximize a financing process outcome.

Valuation 136

Valuation Pre-Money Valuation Angel Investor Syndication 136

K9 Ventures

OCTOBER 10, 2017

This post is intended to be a dynamic document, and I will attempt to update it from time to time with new questions that may arise or as financing trends evolve. Q: What amount of financing is considered Pre-Seed? It’s a legitimate stage of financing in the venture eco-system as of this writing (October 2017).

Seed Stage 82

Seed Stage Finance Later Stage Equity 82

VC Adventure

OCTOBER 8, 2012

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Given the prevalence of convertible debt as a seed financing instrument, an increasing number of companies we look at have some kind of convert in place.

Cap Table 93

Cap Table Dilution Equity Deal Structure 93

VC Adventure

OCTOBER 8, 2012

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Given the prevalence of convertible debt as a seed financing instrument, an increasing number of companies we look at have some kind of convert in place.

Cap Table 48

Cap Table Dilution Equity Deal Structure 48

Scott Edward Walker

DECEMBER 13, 2018

We had a busy 2018, including closing several significant M&A transactions and financings. How is the Deal Structured? The deal is typically structured as an asset purchase (as opposed to a stock purchase or merger) — though the acquirer often does not actually want the startup’s IP and/or other assets.

Founder 45

Founder Merger IP Liquidation Preference 45

David Teten

MAY 20, 2013

Another route is to approach a lender like Domain Capital that is familiar with the industry and will finance the domain at rates far better than traditional financing. If we find the right partner, we can be flexible in deal structures to best align everyone’s interests.

Naming 114

Naming Startup Venture Capital Portfolio 114

David Teten

MAY 20, 2013

Another route is to approach a lender like Domain Capital that is familiar with the industry and will finance the domain at rates far better than traditional financing. If we find the right partner, we can be flexible in deal structures to best align everyone’s interests.

Naming 114

Naming Startup Venture Capital Portfolio 114

Both Sides of the Table

SEPTEMBER 23, 2010

Asked to respond to the topic, “What collusion happens with AngelList, if any&# I wrote the following: “Um, let’s not be naive here and not think that a “form of collusion&# doesn’t happen on virtually any financing round. How well financed is the competition? We discuss deal structures.

Entrepreneur 292

Entrepreneur Technical Review Valuation Stealth 292

Cracking the Code

OCTOBER 10, 2008

Together, CMRR, Cashflow, Churn, CAC, and CLTV make up the “5 C’s of SaaS Finance. For sales, they should be paid on new CMRR with a standard deal structure (such as a one year deal, with quarterly pre-payments), and incentives for more favorable cash flow terms (such as multi-year pre-payments). Justin Label.

Software Review 48

Software Review North America Europe Metrics 48

A Smart Bear: Startups and Marketing for Geeks

JUNE 27, 2011

One of the best ways to arm yourself going into negotiations is to know this number and be prepared to blow up the entire deal if it cannot be met. That means you have to be that sure that that’s the number, regardless of deal structure. They know there’s a minimum valuation, under which you’re not interested.

Sales 235

Sales Term Sheet Stock Deal Structure 235

Entrepreneurs-Journey.com by Yaro Starak

JANUARY 21, 2011

Professionally, I am a Certified Public Accountant (CPA), may also be called a Chartered Accountant (CA) on your side of the globe, a Finance Charter-holder and a Certified Financial Planner. I understand personal finance. It also helps that I arranged seller financing, which meant I didn’t have to take a loan from the bank.

Internet 78

Internet Technical Review Stock Due Diligence 78