Term Sheets & Valuations: A Line by Line Look at the Intricacies of Term Sheets & Valutions (Bigwig Briefs)

FIGURE 11 (10) Special Board Approval Items: Board approval will be required for: 1. Hiring of all officers of the Company. 2. Any employment agreements (approval by a majority of disinterested Directors, or a Compensation Committee when established). 3. Compensation programs including base salaries and bonus programs for all officers and key emplo

When a venture investor is in the business of trying to predict to some high degree of probability a successful financial outcome, he wants to know that the future course of the company is relatively clear and that as many tools as possible are provided to him to influence that future when necessary.

The calculation of pre-money value should be the result of multiplying the total number of shares outstanding, including warrants and issued options, by the price per share that is offered in the term sheet. The post-money valuation is determined by adding the total amount to be raised in equity in the round of financing contemplated by the term sh

The most Investor Favorable clause implements what is called a full ratchet, which means that the effective cost and ownership percentage in the company for the preferred investor who invested at a given price in a prior round adjusts so that the cost and ownership percentage to the old investor is as if that investor invested in the new round side

FIGURE 1 [Company Name] [Term Sheet Date] MEMORANDUM OF TERMS FOR PRIVATE PLACEMENT OF EQUITY SECURITIES General [______ ] Ventures, L.P., and [ ] (the “Investors”) are prepared to invest $ [ ] million in [ ] (the “Company”) under the terms contained in this term sheet. With the exception of the section of this agreement relating to expenses, this

Consequently, there are two variables that differentiate the Investor Favorable and Company Favorable clauses in Figure 6. They are the number of times the original purchase price of the preferred stock will automatically convert into common and facilitate a public offering, and the amount of money that will qualify an IPO as acceptable to the pref

Those investors, having agreed to finance the company on different terms from the common, ask for certain rights, in terms of influence. This is done to compensate for what is typically a minority position at a higher price than common or to retain a level of influence over whether the company entertains future financings, on what terms those finan

FIGURE 9 (8) Protective Provisions: Investor Favorable: The consent of the holders of at least two thirds of the Series [A] Preferred shall be required for any action that (i) alters or changes the rights, preferences, or privileges of the Series [A] Preferred; (ii) increases or decreases the authorized number of shares of Series [A] Preferred; (ii

The degree of influence that a board can have over the direction of a company is diluted unless a board has a balance of management, independent industry experts, and financial investors.