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Angel Term Sheet Evolution

by Basil Peters on November 17, 2009 · 2 comments

Angel Term Sheet Evolution

Bellingham Angel Group Education Breakfast November 17, 2009 – Basil Peters and Dan Rosen

Angel investors are evolving their thinking on term sheets. In the past, some angels used convertible notes or ‘heavy preferred’ term sheets – similar to what traditional venture capitalists would use. Angels have also used common and exchangeable shares. This video series describes the Rosen Light Pref Angel Term Sheet developed by Dan Rosen, Chair of the Alliance of Angels in Seattle. Term sheets are a particularly important topic today as angel groups develop methods for more frequent syndication, or co-investment.

PowerPoint PDF here

Angel Term Sheet Evolution – Part 1 – Basil Peters

Angel Term Sheet Evoluion Part 1 - Basil Peters

  • Angel investing is still new and we are just starting to develop best practices
  • Angels are not the same as Venture Capital investors – we need angel term sheets
  • Angel group syndication (co-investment) requires broad agreement on term sheets
  • Preferred shares, exchangeable shares and common shares
  • Vesting, protective provisions, reporting obligations, governance terms
  • Where the One Page Exchangeable Share term sheet works well

Angel Term Sheet Evolution – Part 2 – Dan Rosen:

Angel Term Sheet Evoluion Part 2 - Basil Peters

  • Introducing the Rosen Light Pref Angel Term Sheet
  • Where it works better than the VC ‘heavy pref’ and other term sheets
  • When common shares work and when they don’t
  • Everything flows from the valuation – Excel is your friend
  • Participating prefs, protective provisions, being entrepreneur friendly
  • Drag alongs, anti-dilution, discounts and warrants

Angel Term Sheet Evolution – Part 3 – Questions and Answers:

Angel Term Sheet Evoluion Part 3 - Basil Peters

  • Questions and Answers on vesting, protective provisions, governance terms
  • Board compensation, lead investors, working with entrepreneurs
  • Why all directors should make a meaningful investment, selecting good directors
  • Exit alignment, redemption rights, exit ‘push’ and ‘pull’, valuation
  • Balancing protective provisions and governance
  • Working with lawyers and negotiating with entrepreneurs

Angel Term Sheet Evolution – Part 4 – Questions and Answers:

Angel Term Sheet Evoluion Part 4 - Basil Peters

  • Questions and Answers on helping entrepreneurs with subsequent round negotiations
  • Why it’s a good idea to negotiate the term sheet and valuation first
  • How lead investors help before and after the investment
  • Optimum financing strategies, valuation, capital efficiency
  • What Angels and VCs think of each other and how its changed recently
  • Is valuation a science or a black art?

{ 2 comments… read them below or add one }

Ronak August 22, 2012 at 12:53 am

Could it possible to get term sheet of funded deal? I can even pay the subscription for such information.
Thanks
Ronak

Reply

Basil Peters September 20, 2012 at 6:00 am

Ronak – I don’t have a specific example that I can share, but Dan Rosen’s light pref is a widely used standard. The important elements that change are specific to each transaction – for example valuation.

Reply

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