Term Sheet
The definition of a term sheet
non-binding agreement setting basic terms under which an investment will be made.
Define Due Diligence
Investigation an investor/founder takes before entering into a contract or agreement.
What is equity crowdfunding?
When start-ups raise capital by selling shares to a "crowd" of investors.
What is the pre-money valuation?
The valuation of a company before investment.
VCIC Investment amount
The amount of capital a firm will invest.
At what stage of funding do founders accumulate seed funding?
Initial financing round (pre-revenue).
How are leveraged buyouts carried out?
When a firm uses borrowd money or collateral to buy a company.
Team's Investment + Syndicate Investments + Pre-Money Valuation = Post-money valuation.
What is a board structure?
Plays a role in shaping the governance of a company.
When do most VC's perfer to exit from an investment?
5-7 years.
What is the formula for internal rate of return?
IRR = (Cash flow)/ (1+r)i - initial investment
What is a syndicate investment? When is it applied?
The amount of investment provided by another investor.
VC standards for liquidation preferences
convertible preferred stocks
What does a cap table show?
% equity of ownership, dilution, and value of equity for each investor.
What is the difference between hard and soft circled investments?
Soft circled is an agreement of terms(usually in the form of a handshake), Hard circled is a legally binding agreement.
Why do VC's use deliverables.
It allows them to outline their due diligence and explain their investment decisions.
Why do companies like anti-dilution clauses?
Allows them to add a clause of protection against shares being diluted and losing equity value.
Why do VC's use term sheets before signing agreements?
They outline the basic conditions to required before an agreement for investing is made.
What is the difference between liquidation and a liquidation event?
Liquidation is when a company discontinues (bankruptcy), liquidation event is when a part of a company is sold to pay to an investor.
How many reasons are included in the pros and cons section of a deliverable?
5 bullet points.