The Ideal First Round Term Sheet (Continued) by Fred Wilson

Source link: https://avc.com/2009/08/the-ideal-first-round-term-sheet-continued/
TL;DR: This is essentially a response to the standard term sheet that The Funded published and Tech Crunch did a write-up about.
How helpful?: 3/5 ****
Topic Tags: term sheets, quick closing, standard documents, The Funded
Relevant questions addressed:
What are some of the pro’s and con’s of The Funded’s proposed term sheet?
Summary bullet points
1X liquidation preference
- This is great for first round financing. It would only make sense to want more than this in later stages
Elimination of participating preferred
- Wilson likes straight preferred but thinks there are times when participating preferred makes sense
- Valuation gets bidded up so that investors can’t make a return on a short term exit, participating preferred could be issued so that investors still get return on their capital in case of early exit
  - If this is used, it should go away at a multiple of price paid (3x)
Single trigger acceleration
- Wilson doesn’t like this provision
- Prefers double trigger with partial single acceleration
  - Double trigger: company is acquired and you are fired
  - Partial acceleration on single trigger: company is acquired and you remain at the company
Follow up links