Term Sheet 101 Resources

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careinnovators | November 18, 2009 - Leave a Comment

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Earlier this month I attended an early morning roundtable on Angel Group & Venture Capital Term Sheets at the Emerging Enterprise Center at Foley Hoag organized by The Capital Network (TCN) in Waltham, MA. There were three presenters and over 60 attendees. The speakers explained some basic terms and concepts on a topic that can quickly get confusing. A few interesting points – Paul Sweeney, a Partner from Foley Hoag, noted that confidentiality and other clauses are legally binding and that term sheets are actually only morally binding – but it’s best for both parties to create well defined term sheets and to stick to the detailed arrangements. Hear what LaunchCapital mentioned after the break.

Elon Boms, a Managing Director at LaunchCapital LLC, discussing the pros and cons of seed stage financing methods, emphasized that convertible notes have misaligned incentives between the start-up founders and the investors – he considers seed preferred stock to be a better method despite higher closing costs and more paperwork. Sample Term Sheets, publicly available from the National Venture Capital Association, were given to attendees.

The meeting cost me $60 to attend (since I’m not a TCN member). But here’s the good news for you – TCN posts select presentation slides for past events on their website, including Elon Boms’ slides. Some slides may seem old, but the basic information remain relevant. It’s a great resource for start-ups.