Angel Term Sheet Evolution Part 1

BY Basil Peters

Angel Term Sheet Evolution – Part 1 – Basil Peters – The One Page Term Sheet

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

Highlights of Angel Term Sheet Evolution- Part 1:

  • Welcome to Dan Rosen, Chair of the Alliance of Angles in Seattle
  • How my thinking on term sheets has evolved
  • How things differ in Washington State and Delaware
  • It is still early days in the evolution of angel investing
  • Term sheets is the most popular topic on my blog
  • Investors rights and where angels need a veto
  • Angel investing today is where Venture Capital was in the early 1980s
  • The fundamental philosophies in the One Page Term Sheet
  • How boards can dilute out shareholders by issuing options
  • Angel group syndication, and co-investment, is new but very important
  • Assumes a good structure and perpetual good governance
  • Defining the majority and why it is so important
  • Syndication requires angels to have wide agreement on term sheets
  • Important elements: KISS and being fair and equitable
  • Reporting obligations and why is so difficult to keep it going
  • What’s changed since our last education event on term sheets
  • Why convertible notes became overused
  • Legal costs should be capped and the company should pay
  • The National Venture Capital Association “Heavy Preferred Term Sheet”
  • The exchangeable share – a tradeoff
  • Board structure – a majority of independents and selection
  • Angels are not VCs and we need term sheets optimized for angels
  • Share and option vesting – possibly the most important term
  • Why I believe all directors should make a meaningful investment
  • The term sheet is the most important document in the relationship
  • How vesting tests the entrepreneurs exit alignment
  • Common shares work well if there will always be a good board
  • How a bad term sheet can kill a financing and the company
  • Drag alongs should be in the company articles
  • Today there are very big challenges building really good boards
  • Why it’s so difficult to fix a bad term sheet
  • How pref shares can veto the majority on important decisions
  • Where the One Page Term Sheet works well
  • Introducing the “Rosen Light Pref” term sheet
  • Super majorities and dissenters’ rights
  • Why the Rosen Light Pref Term Sheet works better

Part 2 of this video online here.

Part 2 of this video online here.