Term Sheet “standard” : ce qu’il faut en retenir. On se plaint souvent que l’Europe est morcelée, parle plusieurs langues, utilise plusieurs monnaies, n’est pas un continuum logistique, ni technologique d’ailleurs au niveau des infrastructures, et du coup représente un marché beaucoup moins propice au lancement de grosses boîtes dans le web. Un autre aspect de ce découpage en « petits » pays, du point de vue des startups, concerne les phases de financement et de levée de fonds : plus de pays, plus de fonds (numériquement), mais plus petits et moins connectés à l’international… Se mettre d'accord sur de l'argent… pas facile Hé bien les choses bougent (doucement) avec pour la première fois des fonds d’investissement qui se regroupent pour envisager de bonnes pratiques en investissement (notamment transfrontalier)… Cela a pris forme très récemment avec (et on salue le coup de comm’ qu’ils s’offrent au passage) la rédaction d’une TermSheet commune de la part de 21 fonds d’investissements.
Pour info, voilà la liste complète : La clause de Ratchet. Une clause de ratchet: qu'est-ce que c'est? Lors d’une augmentation de capital, le prix des titres souscrits par les actionnaires peut être différent de celui négocié par les premiers investisseurs à la constitution de la société ou lors d’une précédente augmentation de capital. Pour que ces derniers se protègent en cas de baisse de la valeur de la société, ils peuvent inclure dans le contrat d’investissement une clause de ratchet.
Cette clause de ratchet a donc pour objectif de prémunir les premiers actionnaires d’une dilution de leur participation lors de nouvelles levées de fonds. Ces clauses de ratchet sont désormais négociées par les investisseurs dès leur souscription au capital d’une entreprise. La clause de ratchet : quel avantage? En cas de levées de fonds ultérieures sur la base de valorisation inférieure, la clause de ratchet prévoit que les investisseurs initiaux puissent souscrire un certain nombre d’actions de façon à rééquilibrer leur participation dans le capital. 1. 2.
Want to Know How VC’s Calculate Valuation Differently from Founders? Back in 1999 when I first raised venture capital I had zero knowledge of what a fair term sheet looked like or how to value my company. Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. It was accept the terms or go into bankruptcy so we took the money. Those were the dog days of entrepreneurship. But the truth is that I didn’t really understand just how screwed I was until years later when I finally understood every term in a term sheet and more importantly I understood how each term could actually be used to screw me. Things like “participating preferred stock” in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.” We got a 3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating. Ugh. Back then VentureHacks didn’t exist.
I turned them down. Term Sheet Overview: Valuation and Option Pool. One of the more contentious things in the negotiation between an entrepreneur and a VC over a financing, particularly an early stage financing, is the inclusion of an option pool in the pre-money valuation. As my friend Mark Pincus likes to say, "it's just another way to lower the price". I'll accept that critique.
And take it one step further. The option pool is absolutely a piece of the price negotiation. But it is a very important one as I'll explain. But first, let me lay out a few things for those who aren't well versed in these matters. But to the entrepreneur it might be a lot more dilutive due to the inclusion of the option pool in the pre-money valuation. In the case of the $5mm post money valuation, that means there needs to be $750,000 worth of options in the pre-money valuation.
I am sure I lost a few of you on all of that math. So it is not surprising that entrepreneurs hate this provision and fight about it every time. I'll wrap with a true story about this provision. Options on early stage companies cdixon.org – chris dixon's blog. I believe that what I’m about to say is accepted by venture capitalists as fact, even trivially obvious fact, yet very few entrepreneurs I meet seem to understand it. An option on a share of stock of an early stage company is (for all practical purposes) equal in value to a share in that early stage company.
Not less, as most entrepreneurs seem to believe (and god forbid you think “the VCs have the option to put in more money” is economically advantageous to you). The volatility of the value of a seed stage startup is incredibly high. I don’t know if any data exists for what volatility estimate would be good to use, but for an informal analysis suppose the average volatility of a seed stage startup is 300%. So if your share price is $1, an option (European Call is a fancy word for options similar to what are given out in startups) is worth $0.9993 dollars.
This is good news for start up employees, directors, and advisors who are awarded stock options. Here’s the bad news. Here's Why You Need A Liquidation Preference. I get a lot of heat every time I mention that I won’t invest without a liquidation preference. People say that it means I don’t want to take a risk. I am happy to take a risk. We do it every time we make an investment. We lose money on some of them and I can live with losing money. It is the price you have to pay for the opportunity to make money. What I am not OK with is an unfair deal. Let’s look at who got what from the sale of Slide to Google. Max Levchin – $39mmScott Banister who also took part in the series A made $5m from the sale.BlueRun Ventures, who invested $8m in the series B round made $28m.The Founders Fund and Mayfield Fund, both investors in the series C, each made their money back.Fidelity Investments, part of the series D: also made their money back.
The reason Fidelity, Founders Fund, and Mayfield got their money back is they had a liquidation preference. I have no issue with Max making $39mm. Termsheet.