- The entrepreneur/VC relationship
- Exposure to deal term sheets
- Moving beyond valuation
- VC negotiations
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Entrepreneur/VC Relationship Entrepreneur VC 3
Provisions to address adverse selection
- Provisions to facilitate monitoring/control rights to information and board seat employment contracts and termination rights
- Provisions to enable harvesting
- Protection of standing anti-dilution provision preemptive rights and right of first refusal
Case Discussion Questions
- Calculate the pre- and post-money valuations for Trendsetter under both term sheets.
- What would the payoffs to the founders and the VC be if Trendsetter is acquired in a transaction that values the firm at $10 million? 25 million?
- What are the main differences and similarities between the two term sheets?
- If you were the entrepreneur and could not negotiate any of the terms in either sheet, which one would you prefer and why?
- How would you seek to alter the terms in each term sheet during negotiations with the venture capitalists?
Trendsetter Inc. Overview
Term Sheets: Key Provisions
- Liquidation preference
- Election of directors
Dividends Winner Reason(s)
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