The only surprising bit for me was the dividends. Most terms sheets I've seen don't require the 6% dividend. Seems weird.
A Standard and Clean Series A Term Sheet
101–110 of 172 posts
Re: A Standard and Clean Series A Term Sheet
#102Earlier quoted context omitted.
Are you starting a (venture-scale) company? Learning this language is critical. Are you working for a startup? Becoming more familiar with this language is helpful - you can figure out whether the founders/executives know what they're doing or not. Are you working for a large company? Learning this language will not provide much benefit for you IMO.
If the answer to either of the first two questions is yes, where would I go to learn the jargon? (I do know about google, I'm just hoping there's a good resource that has everything so I don't need to search individual terms).
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Re: A Standard and Clean Series A Term Sheet
#103I know this article focuses on founders, but I'd love to see something done in the industry for employees (especially early employees!) as well. One of the former companies I worked at never allowed early exercise and issued standard ISO with 90 day expiration upon leaving, which is unfortunately essentially the analogue of "standard and clean" when it comes to employee compensation. By the time I was ready to leave…
thank you for raising this point.
I agree it would be beneficial if the "Standard and Clean Series A Term Sheet" was employee-friendly as well.
Re: A Standard and Clean Series A Term Sheet
#104Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
Why Delaware? I'm like, I grok it's a fan favorite and all for various reasons, but for those who aren't savvy about it, why Delaware? (And ideally: why not Delaware? Given that the gist of the criticism about it is that it hugely favors the investors over the founders and the employees.)
Delaware Court of Chancery is like a standards body for anything else: it's a set of well known, public rules.
Every major law firm has extensive experience in it.
Every major investor's law firm has extensive experience in it.
It doesn't use juries, it uses judges. Cases can move very quickly. The Chancery is well-funded, and the judges have deep experience in corporate law.
Re: A Standard and Clean Series A Term Sheet
#105Jason and I are happy to answer any questions people have about this document: why we included the terms we did, how to think about using, etc.
Why Delaware? I'm like, I grok it's a fan favorite and all for various reasons, but for those who aren't savvy about it, why Delaware? (And ideally: why not Delaware? Given that the gist of the criticism about it is that it hugely favors the investors over the founders and the employees.)
Delaware Court of Chancery, tons of precedent in corporate case law
Re: A Standard and Clean Series A Term Sheet
#106Curious to know what the "typical" ranges are for some of the bracketed sections: * What are typical / optimal post-money option pool sizes? * What are typical / optimal founder vesting schedules? * What are the usual ratios of lead investor / follow-on investor amounts? It seems that the majority of the Preferred can vote to change the # of directors - wouldn't that offset the initial founder-friendly board setup or…
Ranges we see:
Option pools: 10-15% Vesting: If there are new rules here, they are around re- vesting and highly dependent on how long the company has been around. *Ratios: A bit harder to say, but the lead is usually taking a significant majority of the round.
Re: A Standard and Clean Series A Term Sheet
#107As a Series A investor who invests in startups outside of the Valley, it's hugely useful to have something like this (independent of us) that we can point to as to what's normal, especially for founders who don't necessarily have the network to help them. Founder's (and lawyers) who've never seen a term sheet before will often argue against standard terms (which no mainstream VC would move on) and on the flip-side, b…
> will often argue against standard terms
What's that like? Are you competing with other investors? Or do founders agree to forgo funding because they don't like anything on offer?
Re: A Standard and Clean Series A Term Sheet
#108The only surprising bit for me was the dividends. Most terms sheets I've seen don't require the 6% dividend. Seems weird.
I was surprised by the % being included as I figured that would be decided by the board at the time a divindend is approved. I have no idea why a % which would be defined before knowing the details of the companies financial situation.
I wonder if this is more of a protection against the board deciding on a dividend when it is in the best interest in the near term for the company to keep money in the bank. So defining 6% might mean "this company has so much cash that they can return a 6% dividend without harming the long-term potential". Perhaps if you aren't able to return 6%, you aren't ready to return a dividend at all?
Re: A Standard and Clean Series A Term Sheet
#109* What should someone do if they get push back from an investor when asked to this term sheet? * If this term sheet is used, can we avoid the legal costs of a Series A?
Probably raise from elsewhere. We got a term sheet that included all the bad things mentioned about control in there. They wanted a 2-2-1 board + a whole bunch of protective provisions about requiring their approval for almost anything. Overall wasn't a pleasant experience and we would have saved months of our time had we not bothered working with them.
We got very lucky that things didn't work out with them
Re: A Standard and Clean Series A Term Sheet
#110Earlier quoted context omitted.
it is, of course, complete BS that this is the norm. however, be aware that you can negotiate for early exercise or 10 year expiration prior to joining. even if the startup has never done anything like that prior, they will make it happen if they really want to hire you.
I have a deep network of friends in Silicon Valley who jump from startup to startup, and I tried to educate them when it comes to this topic, telling them to absolutely make sure the equity conditions were reasonable. None of them has ever managed to change those on an offer, it always comes back as "It's the standard contract!", and they are in general strong performers. In my experience, unless you are really an in…
perhaps im extrapolating too much based on my own two data points. im just a normal senior eng, but have been able to get my last two offers modified (once with early exercise, once with 10 year expiration).