In my last post, I listed four areas that Term Sheets cover. This week, I thought I would focus on some of the “Economic” terms. The terms below apply to Convertible Preferred Stock, although there are clearly other types of securities used to fund early stage companies. These “economic” terms outline who gets what and cover such concepts as:
Valuation: For a Preferred Stock Offering, this represents the per-share price that you will be paying for the investment as well as the “pre-money” company valuation that this price implies. In addition, the term sheet will typically indicate the “post-money” valuation which includes in the company valuation the new funds being invested. Continue reading
Posted in Angel Groups, Angel Investing, Due Diligence, Golden Seeds, Term Sheets, Uncategorized, Venture Capital
Tagged Angel Investing, Early Stage Company Valuation, Early Stage Investing, Exit, Golden Seeds, Investment, Liquidation Preference, Liquidity Events, Term Sheet Economics, Term Sheets, Valuation
Probably one of the things I have found that many of my fellow angel investors enjoy even less than analyzing the financial model of a company they are contemplating investing in (see my last post ) is diving into the Term Sheet. A term sheet is a document that lays out the key terms of a proposed investment. Once those key terms have been negotiated and the term sheet is executed by both parties, it serves as the basis for drafting the other documents which comprise the legal closing documents in a transaction.
At a recent meeting, one of colleagues made the comment that term sheets are like country western songs – you know those soulful ballads that bemoan the difficult breakup, the secrets never shared, the soulmate you trusted who walked away and left behind a pile of debt…… When you make an angel investment you are not only entering into a financial transaction, you are entering into a relationship with the CEO/founders/management team. If you have been investing in this sector for awhile, it is likely you have made at least one investment that did not turn out as planned! Another way to think about the term sheet is a kind of “pre-nup” for angel investing. Clearly if you don’t really believe that a particular investment has the potential to be a good partnership over time, you probably shouldn’t make the investment. Continue reading
Posted in Angel Groups, Angel Investing, Due Diligence, Financial Models, Golden Seeds, Opinion, Term Sheets, Uncategorized, Venture Capital
Tagged Alex Wilmerding, Angel Investing, Deal Economics, Early Stage Company Valuation, Exit Strategy, Follow-on Rounds, Golden Seeds, Term Sheets, Valuation, Women Angels
“I am a serial entrepreneur with a business idea that will generate $100 million in sales in 3 years!!!!” , sound familiar? As an angel investor, I meet many passionate entrepreneurs who present a very optimistic outlook for the future of their business concept. Building financial projection models is a very difficult process for the CEO of an early-stage company and an even more difficult process for the investor to believe in.
So, is there any real value in financial projections? Continue reading
Posted in Angel Groups, Angel Investing, Due Diligence, Financial Models, Opinion, Uncategorized
Tagged Angel Investing, Angel Investor, Early Stage Company Valuation, Exit, Financial Modeling, Golden Seeds, Investment, Investor, Valuation, Women Angels