Join us for a Q&A session with OurCrowd Partners, Zack Miller (Investor Community) and David Stark (Investments), about the fundamentals of deal terms in startup investing. Learn how professional investors analyze and construct terms and conditions for their investments.
Conquering the Term Sheet: Everything you need to know about deal terms
In this 30-minute webinar, you will:
Understand the basics of deal terms, from full ratchet to anti-dilution
Get an insider’s view of crafting deal terms in startup investing
Learn what to look for in a term sheet from seed stage to pre-IPO
11. Art and a science of valuation:
multiple methodologies
Early Stage
Mid Stage
http://blog.ourcrowd.com/index.php/2014/05/14/cashing-in-how-to-make-money-investing-in-startups/
Late Stage
Source:
PreferencesESOPValuation
12. Understanding objectives of founder/investor
relationship:
zone of possible agreement (ZOPA)
PreferencesESOPValuation
13. Real Life Case Study
Deal terms reflect the
current reality at the
time they’re crafted
PreferencesESOPValuation
14. Real Life Case Study
PreferencesESOPValuation
effectively better value
17. Valuation ESOP Preferences
Investing at fully-diluted, premoney valuation with sufficient
ESOP allocated to result in target postmoney pool
$20M premoney valuation
Existing ESOP: 10%
Desired ESOP: 20%
(10% will come out of premoney)
Effective Valuation: $18M
20. Valuation ESOP Preferences
We invest $1M at
$4M premoney (20%
ownership)
Company gets
acquired at $10M
Example
Non Participating preferred
The greater of [1]x OR prorata
$1M OR 20%*$10M
$1M < $2M
21. Valuation ESOP Preferences
We invest $1M at
$4M premoney (20%
ownership)
Company gets
acquired at $10M
Participating preferred
[1]x AND prorata
Money back and then piece of remaining
pie…so,
$1M + (20%)x($9M) = $2.8M
Example
22. Valuation ESOP Preferences
We invest $1M at
$4M premoney (20%
ownership)
Company gets
acquired at $10M
Example
Partial (capped) Participation
[1]x + prorata up to [5]x
If exit was $100M, then…
23. Valuation ESOP Preferences
Liquidation prefs can
create indifference
towards certain exit
scenarios
Tradeoffs:
Relationship between valuation and preferences
25. Next step?
Join us next week for Lesson 2
Anti-dilution protection
Board representation
Control provisions
OurCrowd.com
Check out our real-life
term sheets by
accrediting on our
website