Comments on: Terms, Terms, and First Round Terms

By: RightSide plants many seeds | Solid Startups

RightSide plants many seeds | Solid Startups — Thu, 25 Feb 2010 18:11:28 +0000

[...] for the term sheets, I like that as well. People have been attempting standard term sheets for some time, with little success. I hope this move gets them closer to the goal of lowering the [...]

By: Some Complexities of Venture Capital Seed Investing

Some Complexities of Venture Capital Seed Investing — Sun, 18 Oct 2009 18:19:57 +0000

[...] as committed in a convertible note round as they are when they price a seed round and do it as a typical VC preferred financing, albeit with lighter [...]

By: Brad Feld

Brad Feld — Tue, 13 Oct 2009 11:40:07 +0000

Control is a lot less important in a seed round. While you want light protections – see http://www.feld.com/wp/archives/2009/08/the-chall... – they are more around the acknowledgment that the investors should have to affirmatively consent – at least at some threshold – for transformative corporate actions (e.g. a sale or another financing).

By: Mike Boucher

Mike Boucher — Tue, 13 Oct 2009 05:22:21 +0000

If memory serves, the term sheet series that you and Jason did stated that the two things worth negotiating are money and control. Where'd control go in the new valuation-and-amount model?

By: Brad Feld

Brad Feld — Tue, 29 Sep 2009 20:18:05 +0000

Super neat!

By: @valto

@valto — Tue, 29 Sep 2009 13:39:14 +0000

Brad. I have been following this conversation and development for a while. As we started to develop solutions to this in regards our own service http://www.growvc.com, instead of just "work in our own silo" we decided to just "open source" this whole part of our dev. and so http://www.startupcommons.org was created.

Startup Commons have a three item plan for this:

1. create categorizing model to identify different types of start-ups
2. find/build/attach high level sets of terms for different categories
3. develop efficient web tool to better manage the logistics and communication of the agreeing process (start with high level term sets by category with "blog style" commenting per each term)

We have registered the SC as non-profit association, so it can be used as vehicle for the whole global ecosystem.

Would love to get your feedback and input as well.

By: The Challenge of The Ideal First Round Term Sheet

The Challenge of The Ideal First Round Term Sheet — Tue, 25 Aug 2009 21:01:46 +0000

[...] my share of financings with a set of bullet points in email (I just proposed one today) and I’ve stated that the only things people should care about in the first round financing is (a) valuation a…. That said, there will always be a handful of other things to argue about in a first round [...]

By: Brad Feld

Brad Feld — Mon, 24 Aug 2009 16:08:05 +0000

Yeah – I saw it. It’s actually missing some basic stuff and has plenty of unnecessary stuff in it. Even worse, the issue is NOT a standard term sheet, it’s a standard set of deal docs. I’ll write a post about this soon.

By: JChauncey

JChauncey — Mon, 24 Aug 2009 12:11:04 +0000

This was on techcrunch this morning – http://www.techcrunch.com/2009/08/23/the-funded-p...

http://www.docstoc.com/docs/10303638/FFI-Plain-Pr...

By: Dave

Dave — Sun, 23 Aug 2009 04:56:48 +0000

Term sheets should be easier. Unless you need diligence, you don't need lawyers. I am a lawyer. I never understood how the most complex financial transactions in the world–all sorts of financial derivatives–run off the ISDA master swap agreement with a term sheet summarizing terms on it but a VC financing cannot. I finally concluded that lawyers don't understand most derivatives and the transactions need to happen more rapid fire between banks acting as dealers, so they settled on ISDA's and then they don't need lawyers. Lawyers can understand VC financings so make them more complicated than needed, and there are no primary forces in the VC world like dealers to drive consistency. It is baffling to me though. Series A VC financings are just not that hard, but there are too many players–lawyers and VCs–to get to consistency. A big waste of time though.

By: Brad Feld

Brad Feld — Tue, 18 Aug 2009 16:06:06 +0000

I don’t have the exact data at my finger tips, but from memory it ranges from $0 to $200k. Seed deals tend to be lower – typically $80k to $120k (although it depends on the specific entrepreneur and their situation). I’ve also had a number of companies with > $5m in financing where the entrepreneur took $80k or less and the management team was capped at $150k.

I don’t have a specific rule for this – I view it as situation specific.

By: James_Mitchell

James_Mitchell — Tue, 18 Aug 2009 00:09:55 +0000

Brad, it would be very useful to know what CEO salaries are for a company you invest in. How about if you take the last ten companies you funded, throw out the lowest and highest number, and listed the eight numbers? It would be useful data.

By: Jeremy Wright

Jeremy Wright — Mon, 17 Aug 2009 22:02:54 +0000

Don't worry, I agree, though effectively the YC/TS docs are standards (a standard's only a standard if somebody uses it, right?) since folk are referring to them as starting points.

Anyways, yeah, *shocking* that a firm would bait/switch. My hope is that folk like you getting out in front of this and saying "we support standards" in general will help, especially in places like Canada where less firms investing has meant poorer treatment of entrepreneurs in the last year.

By: Brad Feld

Brad Feld — Mon, 17 Aug 2009 22:00:05 +0000

I agree. I’ve tried encouraging them to no avail. There is no value add from lawyers at the first round / Series A and they know it, but won’t admit it. Look for the first commercial release of Brightleaf’s software (http://brightleafcorp.com/) – coming soon. That’ll help with the Madlibs game.

By: Andrew Parker

Andrew Parker — Mon, 17 Aug 2009 20:15:07 +0000

I would love to see WSGR, Cooley, and Gunderson standardize on a set of "Standard Series A Docs," but I'm skeptical of this actually happening because doing so would commoditize their value-add. If those three firms agreed on a Standard, and that Standard were open source, then any firm could come it, play a game of "mad libs style fill in the blanks," and charge 1/4 of what those three firms bill for a Series A closing. So, if those three firms are going to agree on a Standard, it's going to have to be the VCs and Entrepreneurs that drive them there, because they're not incentivized to get there on their own.