Anatomy of a Term Sheet: Liquidation Preference
Tuesday, June 29th, 2010We continue our discussion of the Charter provisions with the liquidation preference, which is the most important economic term in the term sheet after the valuation because it establishes the relative rights of the investors and the common stockholders with respect to assets available for distribution when the company winds up its business.
Anatomy of a Term Sheet: Dividends
Friday, June 25th, 2010Dividend provisions are often overlooked by entrepreneurs, but can have a significant effect on the economics of a financing. The model term sheet includes two alternative dividend provisions, one providing that dividends will be paid only when also paid to the common stock (company favorable), and the other providing for “accruing” dividends on the preferred stock (investor favorable).
Anatomy of a Term Sheet: Nature of a Term Sheet and Summary of Offering Terms
Tuesday, June 22nd, 2010The introductory paragraph in the NVCA’s model term sheet is important because it makes clear that, for the most part, the term sheet does not create any legally binding obligations. Entrepreneurs must recognize that a term sheet is an agreement to try to reach an agreement, and therefore only a steppingstone (albeit an important one) on the path to financing.
Anatomy of a Term Sheet: Overview
Tuesday, June 22nd, 2010A key milestone in the lifecycle of many successful companies (and, admittedly, many unsuccessful companies) is obtaining financing from angel or venture capital investors, but in negotiating with experienced investors entrepreneurs are usually at a distinct disadvantage because they are unfamiliar with standard terms. While we strongly suggest entrepreneurs consult their lawyers rather than negotiate [...]