Do "A Standard And Clean Employee Equity Offer" next! Seriously.
I concur. Do you concur?
A Standard and Clean Series A Term Sheet
141–150 of 172 posts
Re: A Standard and Clean Series A Term Sheet
#142Can someone please help me understand what common re-vesting schedules are for founders? Like, if I raise seed money, surely I'll have to agree to a reasonable 4-year vesting schedule. But then if I raise a series A, B, and C, do I have to agree to new vesting schedules at each raise? Will I then not fully vest until 4 years after my series C? Do I lose all my vested shares at each raise? On the one hand re-vesting seems unfair to me, but on the other hand if I were to give someone 20 million dollars I wouldn't want them to quit the next day.
Also, sometimes you hear about founders being fired by their board. In this case, are they getting fully vested or are they just leaving with the equity they had vested at that point in time?
Re: A Standard and Clean Series A Term Sheet
#143This term sheet template is very investor friendly primarily because of the lack of detail. The Company has very little leverage after a term sheet is signed especially given a standard no-shop provision. You want to reduce the number of items that need to be negotiated later in the process as much as possible. This not only reduces the likelihood of having to agree to a less than favorable term that was not addresse…
Agreed. A founder should assume any ambiguity in a term sheet will be resolved in the investors favor (since you're very unlikely to walk away from a deal after signed). I preferred more comprehensive term sheets so that we could pin everything down while the investor was still in "courting mode".
Something we did in our later financings was to (very politely) provide an interested investor with a fairly comprehensive (~7 pages) template term sheet that had blanks for the major economic terms, but otherwise fully specified all the details of the proposed deal. This kept things from drifting off "founder friendly" after signing and had the added bonus of making offers easier to compare.
Re: A Standard and Clean Series A Term Sheet
#144Can someone please explain each clause in layman’s terms. Thanks.
Trying to learn the lingo of VC.
Re: A Standard and Clean Series A Term Sheet
#145Earlier quoted context omitted.
Our safe docs are pretty good for this: https://www.ycombinator.com/documents/#safe .
iirc the SAFE doesn’t cover vesting, information rights and control rights (I guess this is because typically companies that YC invests in are set up with something like Stripe Atlas or similar?) In many European hubs the typical term sheets for seed financing are provided by Angels or seed stage VCs and typically aren’t as founder friendly as in the US. Having more information/a recommended seed term sheet from YCom…
AFAICT, the norm with SAFEs is that they're very hands off in terms of company operations, at least in SV.
Re: A Standard and Clean Series A Term Sheet
#146Former founder here. I wish I had had this when I was raising my series A. I lost control of the board at my series A when the VC said that a 2-2-1 structure would be better for everyone. 13 months later, I was fired from the company I had started. The risks are real. Had I known what a standard, clean series A term sheet looked like, I could have just pointed to this term sheet on ycombinator.com and said - "Make it…
Could you link to some of these resources , their start up school doesn't really include documents such as this.
Here you go:
Re: A Standard and Clean Series A Term Sheet
#147Earlier quoted context omitted.
I was under the impression that more and more founders (and even investors) are speaking out against the idea of legal fees paid by the founders. Is that only at the seed stage and acceptable at Series A?
To me it is totally unreasonable. We had a series A investor that required that. Their attorneys poked around and argued about every little thing and charged us $1200 an hour. They even had a $50k cap in the documents which they asked the VC to raise once they saw they were going to be able to exceed. The VC of course agreed because it wasn't his money and then proceeded to pressure us to accept it. We had already wa…
If my company is going to pay your legal fees, then they work for me, not you [sic] and I will reserve the right to fire them
This the most logical comment on this thread. I can't believe people accept paying a VC's legal bills during a negotiation. VC's are in the business of doing deals, and have their own legal retainers to work on those deals - not to mention a fan favorite movie "My Cousin Vinny" teaches every American that giving $1 to a lawyer creates client-attorney privilege.
It's amazing that without being sued (and then losing on appeal in court), people are willing to pay out of pocket for a lawyer to actively work against them in what could be one of the most important deals of a founder's life.
Re: A Standard and Clean Series A Term Sheet
#148Founders should invest time and effort to ask for more board seats. The YC doc is a good start but if you follow this to the letter you may lose control in your B or C when the B and C investor also want board seats. Also it’s important to keep in mind that there is no “standard.” Everything is always negotiable.
Re: A Standard and Clean Series A Term Sheet
#149Could someone here talk more about the "no shop" clause, which seems 100% geared toward giving a buyer better than a competitive price. But, the document says it is the only term that is legally binding!
How is "nothing in this document is legally binding and the buyer doesn't have to buy, EXCEPT for the term that the seller may not talk to any other buyers in any way." What kind of sense does that make? Would you "accept" an offer to sell your car that says it isn't binding in any way except that you may not talk to anyone else about selling your car to them, for the next 30 days?
Also since it says it is "legally binding" what are the remedies? What is the history of such a term?
Why would founders agree to it and actually follow it?
Re: A Standard and Clean Series A Term Sheet
#150This term sheet template is very investor friendly primarily because of the lack of detail. The Company has very little leverage after a term sheet is signed especially given a standard no-shop provision. You want to reduce the number of items that need to be negotiated later in the process as much as possible. This not only reduces the likelihood of having to agree to a less than favorable term that was not addresse…
>especially given a standard no-shop provision.
Why is the no-shop provision standard, especially given that this document says it's the only binding term? What's going on here? I'd like to understand it a bit more.