EP6.

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Key Takeaways

• Terms should be viewed as a package, not individually - optimizing for one term may require trade-offs on others
• Prioritize what's best for the company's success, not just favoring founders or investors
• Key terms: liquidation preferences, anti-dilution, pre-emptive rights, vesting
• Current trends: more founder-friendly terms, increased focus on ESG reporting, drag-along thresholds

Topics

Investment Process Overview

• Term sheet is non-binding but guides key agreed terms before legal docs
• Due diligence done after term sheet, focused on accuracy of representations
• Negotiating shareholder agreement, subscription agreement, share purchase agreements
• Money transferred and shares issued after all agreements signed

Setting Terms Philosophy

• Investing for the upside potential, not the downside
• It's a long-term partnership, not a transaction - don't view it as founders vs investors
• Consider precedents being set that future investors will expect
• View terms as a total package, not individually

Liquidation Preferences

• Principle that investors get their money back first if company sells for less than invested amount