Term-Sheets: Some Silicon Valley Resources
Ran across a post by angel investor Mark Suster on Quora relating to examples of good startup term sheets, and had to share it with the community, below.
To add a bit of background, term sheets are what you (as an entrepreneur) will deal with every time you want to raise funding for your startup, whether from venture capitalists (VCs), corporations, angel investors (“business angels”), or friends and family.
For a detailed look at understanding, negotiating, and finalizing term sheets, we have found a great two-part article by Bloomberg Businessweek columnist Tom Taulli, defining key terms and discussing common pitfalls for entrepreneurs negotiating an investment term sheet with venture capitalists
How to Negotiate a Term Sheet
A term sheet is a document prepared by venture capitalists that sets forth the key terms of a proposed investment. The temptation for the entrepreneur is to focus mostly on the overall valuation of the transaction. But this can be fatal. Keep in mind that a term sheet has a variety of protective clauses for the VC that can significantly reduce the valuation for the entrepreneur. As a result, it’s imperative to have an experienced attorney negotiate a term sheet with you.
Read more: How to Negotiate a Term Sheet.
Question: What are examples of good startup term sheets?
1. I did a short video at BothSidesoftheTable that talks about the key terms in the term sheet you need to know about AND how VCs calculate valuation differently than entrepreneurs and what to look out for.
2. Ycombinator open source term sheet is a good start for Seed deals. I have used this myself (slight modification): http://ycombinator.com/seriesaa.html
3. TechStars did one, too: http://www.techstars.org/2009/02…
4. NVCA (national venture capital association) standard template is used by many VCs for their Series A,B term sheets so you should be aware of this and its language. http://www.nvca.org/index.php?op…
5. Wilson Sonsini (one of most respected law firms in Silicon Valley) does a “term sheet generator” here: http://www.wsgr.com/wsgr/display…
6. Brad Feld does the best blog term sheet series. So good, in fact, I seldom try to write on the topic. His is already the Apex and I tell everybody to read it. Greg Martin created a DropBox PDF summary of the series, which is here:http://dl.dropbox.com/u/506322/T…
7. Ted Wang (Fenwick & West) created the “Series Seed” set of documents
About Mark Suster – General Partner, GRP Partners
Mark joined GRP Partners in 2007 after having worked with GRP for nearly 8 years as a two-time entrepreneur. Most recently Mark was Vice President, Product Management at Salesforce.com (NASDAQ: CRM) following its acquisition of Koral,where Mark was Founder and CEO. Prior to Koral, Mark was Founder and CEO of BuildOnline, the largest independent global content collaboration company focused on the engineering and construction sectors, which was acquired by SWORD Group (PARIS: SWP). Earlier in his career, Mark spent nearly ten years working for Accenture in Europe, Japan and the U.S. Mark received a BA in Economics from the University of California, San Diego, and an MBA from the University of Chicago. In the current portfolio, Mark sits on the Boards of Ad.ly, Awe.sm, Burstly, GumGum and Ring Revenue and is a Board Observer of Qualys.
Follow Mark on Twitter http://twitter.com/msuster
Read Mark’s blog: http://www.bothsidesofthetable.com