Ben & David take their turn at the "power ballad" of VC blogging/podcasting, explaining how venture term sheets work. From valuation to pro rata rights to founder vesting, we leave no stone unturned in this episode. If you're a founder, work at a startup, or are considering doing one of those someday, this episode is for you!
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Links from the Show:
Acquired LP: Demystifying Corp Dev (Sara Adler)
Jeff Bezos, Vesting, and The Divorce
Standard Series Seed Term Sheet [Link in Bio]
Show Bookmarks:
02:46: What is a Term Sheet? What is it for? When does it happen?
06:02: The History of Term Sheets
07:50: Timeline of Term Sheets
09:30: Who is responsible for the definitive documents?
12:40: Breaking down the Standard Series Seed Term Sheet [The 95%]
14:40: How is Valuation and Dilution determined? How does it work?
22:22: What is an Option Pool?
26:41: What is the standard for Option Pool duration?
27:50: How do I plan for fund-raising for my business?
31:59: The rest of the Term Sheet [The last 5%]
32:25: Liquidation Preference
35:22: Voting Rights, Voting Events, and Control Terms
40:10: The Costs of Investing and other Financial Information
43:55: What are Participation Rights?
48:03: The Costs of Investing revisited
50:17: Key Holder Matters / Founder Vesting / Resetting Vesting
56:05: Acceleration and M&A
58:53: Binding Terms and Wrap Up
61:37: Acquired LP - Lyft Episode Follow Up
People Worth Knowing:
Brad Feld
George Soros
Greg McAdoo
Jeff Bezos
Jon McNeill
Carl Icahn
Logan Green
Louis Gonda
MacKenzie Bezos
Philip Deutch
Saraa Adler
Ted Wang
Companies Mentioned in Episode:
Avis Rental Car
Cooley
Cowboy Ventures
Digital Equipment Corporation
Enterprise Rent A Car
Fenwick and West
Github
Lexington Ventures
Lyft (ZimRide)
Oasis Investment Partners
Social Capital
Zip Car
Episode Specific Terms:
Acceleration
Aggregate Proceeds
Alignment
Binding Terms
Board of Directors & Lead Investor
Change Number Directors
Control Term vs Economic Terms
Declare Dividends
Definitive Documents
Documentation Terms
Earn Outs
Financial Information
Founder Vesting [Resetting Vesting]
Fundraising Expenses
Future Rights
GAAP
Guard Rails [leaving room for other investors]
Liquidate or Dissolve Approval
Liquidation Preference and Preferred Stock
Liquidity Event
Market Terms
Option Pool
Participation Rights
Pre Money vs Post Money Valuation
Preference Stack
Preferred Stock vs Common Stock
Priced Round
Redeem/Repurchase Shares
Runway
Securities To Issue
Term Sheet
Valuation Term
Ben and David’s Affiliations:
Wave Capital, @WaveCapitalVC
PSL, @psl
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- Suggestions and Feedback:acquiredfm@gmail.com
What is ACQ2: The Acquired Interviews?
ACQ2 is Ben and David's conversations with expert founders and investors. Acquired the stories of great companies — and ACQ2 dives deeper into the lessons we can learn from them, often with the protagonists themselves.