Come to Terms with Angel and Venture Term Sheets

Term Sheet Fundamentals:

William S. Perkins, Partner Jason M. Rodriguez, Counsel

A Play in Three Acts

WHO ARE WE?

Will Perkins Will Perkins concentrates his practice on general corporate matters and licensing matter, with an emphasis on strategic investments, mergers and acquisitions, structuring and financing new ventures, and public and private offerings of securities, including representation of both financial and strategic buyers. He represents both public and private companies, as well as private equity funds, in a wide range of transactions including venture capital financings; in-licensing and out-licensing transactions; product manufacturing and distribution arrangements and initial public offerings and follow-on public offerings of equity and debt securities.

Jason M. Rodriguez Jason Rodriguez advises public, private and emerging companies on a broad range of corporate matters with a focus on venture capital transactions, mergers and acquisitions, joint venture transactions, licensing transactions and equity and debt financings. His work covers various industries, including telecommunications, life sciences, high technology, Internet services, broadcasting, software and publishing. He provides pro bono services to nonprofit organizations through the Lawyers Clearinghouse on Affordable Housing and Homelessness Inc. and the Boston Bar Association Business Law Pro Bono Project.

OUR DAY JOBS

WHO ARE WE TODAY?

Entrepreneur........................................................Jason Rodriguez Jason, an engineer by training, spent many years in the labs of a large technology company. He is now leading a few of his former work colleagues into a new tech start-up. Having spotted the growing interest in electric cars, Jason and his team have developed a product that sits between the power source (e.g., wall plug) and the charging port on the vehicle and speeds up charge times by 30%-50% (in early lab tests of a crude prototype). SpeedyCharge needs $500k-750k to develop a beta version of its product and place it with a local, electric car club, which has signed on to beta test it.

Serial Angel Investor...................................................Will Perkins

Will, a lawyer by training, now spends his time investing in early-stage growth companies – while appropriately still referred to as an angel, together with his group of old friends, he functions almost as an angel fund of sorts.

SETTING

Previously... Originally introduced by email through a mutual connection, Jason and Will had a long teleconference where Jason talked will through SpeedyCharge’s pitch deck and its business model. Will expressed an interest in investing, subject to meeting in person to discuss and negotiate agreeable terms.

Now... Jason and Will are meeting in person for the first time at a local craft beer hall to discuss and negotiate terms for Will’s angel investment.

ACT I Will and Jason meet at The Beer Hall and jump right into their negotiation. Things quickly turn to valuation...

Key Terms •  LLC ❒ •  Corporation ❒ •  Founders ❒ •  Valuation ❒ •  Cap table ❒ •  Pre-money ❒ •  Post-money ❒ •  Convertible notes ❒ •  Preferred stock ❒ •  Priced round ❒

•  Conversion cap ❒

ACT II With valuation and structure settled, Will and Jason turn to other key terms and topics...

Key Terms

•  Option Pool ❒ •  Vesting ❒ •  Pre-emptive rights ❒ •  Blocking rights ❒ •  Protective provisions ❒ •  Board seat ❒ •  Observer ❒

ACT III Things are wrapping up...

Key Terms •  Information rights ❒ •  Timing ❒ •  Drafting ❒ •  Counsel ❒ •  Expenses ❒

ACT IV

What didn’t come up... Key Terms

•  Dividends ❒ •  Participating preferred ❒ •  Anti-dilution ❒ •  Weighted-average ❒ •  Registration rights ❒ •  Full ratchet ❒ •  ROFR ❒ •  Co-sale ❒ •  Drag ❒

Other Resources

•  The National Venture Capital Association’s “‘template’ set of model legal documents for venture capital investments” are available at:

http://www.nvca.org

•  Series Seed documents are designed to simplify standard venture investment legal documents for seed rounds and are almost “venture-lite” documents. They are available at:

http://www.seriesseed.com •  These model documents, while instructive and prepared in some cases with helpful

annotations, are no substitute for a thorough discussion/translation by your own counsel

William S. Perkins Partner 617-951-8574 [email protected]

Thank You and

Call us! We genuinely love these topics and are always

happy to brainstorm and answer questions.

Jason M. Rodriguez Counsel 617-951-8182 [email protected]

Bingham Offices

Come to Terms with Angel and Venture Term Sheets

Business

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