- Title:
- Author: Michael Arrington
- Source link: https://techcrunch.com/2009/08/23/the-funded-publishes-ideal-first-round-term-sheet/
- TL;DR: A good term sheet should not have participation with preferred stock, have a 1X liquidation preference, and single trigger vesting acceleration on acquisition.
- How helpful?: 4/5 ****
- Topic Tags: term sheet, typical structure, basic
- Relevant questions addressed:
- What are some basic terms that I should look for in a term sheet?
- Summary bullet points
- Adeo Ressi (founder of The Funded) released a basic term sheet for use by investors and founders.
- Protect founders and reduce legal fees
- Key Terms
- Elimination of participation with preferred stock
- When there is participation, VCs get their liquidation multiplier back AND are able to participate pro-rata in a sale
- 1x liquidation preference
- Single trigger vesting acceleration on acquisition
- VCs like double trigger because it’s easier to sell a company whose founders are locked in
- Having a standardized sheet like this means huge legal cost savings
- Follow up links