Setting The Deal, Athens 2015
Setting the Deal
A typical Venture Capitalist might see over 200 companies per year and might participate in more
than 20 negotiations per year. On the other hand a typical entrepreneur most of the times has
never experienced such a negotiation before. In this event we shed light into the dark secrets of
Venture Capital and the term sheet negotiations.
What is the anti-dilution clause?
What are the pre-emptive and preference rights?
What are the incentives and thoughts in each side of the negotiating table?
Setting the Deal recreates a whole Venture Capital negotiation. An experienced Venture Capitalist
against a successful entrepreneur and his legal advisor are negotiating the terms of an early stage
financing deal. Before the negotiation process starts the attendees will be presented with the
main clauses of a term-sheet in order to be able to fully understand the motivation and strategy of
each side.
A must not miss event not only for the entrepreneurs who are currently in the process of raising a
financing round, but for everyone who is interested into diving deeper in the world of Venture
Capital.
Setting The Deal, Athens 2015
Program
19:00 Welcome / Introduction
19:05 – 19:35 Explanation of Basic Terms
19:35 – 20:40 Setting the Deal
on Valuation, Liquidation Rights, Vesting, Protective Provisions
20:40 – 20:55 Q&A
20:55 – 21:00 Wrap-up
Setting The Deal, Athens 2015
Roles
The Venture Capitalist
Spyros has been an active investor in Greek early stage
and growth companies since 1999 following a career in
telecom operations consulting. Prior to joining Odyssey
Venture Partners, Spyros established Oxygen Capital
NeoVentures, a growth capital fund and before that he
was an investment director and co-founder of NBGI
Ventures and an investment manager with Global
Finance. Spyros investments have included: InternetQ,
Information Dynamics, spitogatos.gr, Theta
Microelectronics, Forth Photonics and Zephyr
Communications among others. He is currently a
member of the board of the Hellenic Venture Capital
Association and has in the past served on the boards
and investment committees of several private
companies and funds.Spyros holds a Diploma in
Electrical Engineering from the University of Patras and
an MBA from Insead. The Entrepreneur
John is co-founder and CEO of Pollfish P.C. Pollfish is a
platform that provides brands a revolutionary way to
learn, communicate and interact with existing and
prospective customers. Passionate about platforms and
businesses that scale mainly focused on the mobile
domain. Prior to Pollfish, John was the co-founder of
Pajap.
Setting The Deal, Athens 2015
The lawyer
Nayia is the founder and managing attorney of the Nayia
Antoniou & Associates law office that is based in Kolonaki at
Athens, Greece. Focused on Company & Commercial matters,
advising on company establishment, corporate governance,
internet law and the entry into all type of commercial contracts,
including shareholder, terms of use, privacy policy, term sheet,
convertible note, investment, intellectual property (IP) transfer,
IP licensing, agency, distribution, incoterms, franchise and
sports agreements. Representing clients in the registration of
trademarks, patents and competition law matters. Also advising
in particular on the legal framework within which foreign
companies operate in Greece. Providing preemptive legal
support in Greek or English.
The moderator
Nick is an Analyst at the Randstad Innovation Fund (RIF). RIF
is the Venture Capital arm of Randstad to invest in
innovative HR Technology companies. Before joining RIF,
Nick worked as an investment Analyst at Dutch Expansion
Capital (DEC) and as an Investment Manager at
Startupbootcamp HighTechXL, investing in and accelerating
high tech ventures. He studied Computer Engineering at the
University of Patras and holds an MSc in Finance and
Investments (cum laude) from Rotterdam School of
Management. Nick has also worked for Rockstart
Accelerator in Amsterdam.
Setting The Deal, Athens 2015
The Host
Demetrios is the Startups and Entrepreneurship Editor at
Startupper.gr and EMEA.gr. With a background in communications
and mass media, Demetrios is a senior edior at Delta Press, the
media company behind well-respected business news portal
EMEA.gr and the leading source of information on tech
entrepreneurship in Greece, Startupper.gr. He covers extensively
the startup, digital economy and venture capital markets of Greece.
Setting The Deal, Athens 2015
Term Sheet
Preliminary Note
This term sheet is created by using as a basis the model term sheet of NVCA, as can be found in http://www.nvca.org/index.php?option=com_content&view=article&id=108&Itemid=136. It maps to the NVCA Model Documents, and for convenience the provisions are grouped according to the particular Model Document in which they may be found.
This term sheet is created by Setting the Deal and is based on a hypothetical scenario. It is
not representative of the terms that any particular participant to the event would propose. It could
be perceived as an aggressive term-sheet and the reason for that is to facilitate the discussion and
negotiations during the Setting the Deal event.
TERM SHEET FOR SERIES A PREFERRED STOCK FINANCING OF
[HOME.CONNECT_] [MARCH 21, 2015]
This Term Sheet summarizes the principal terms of the Series A Preferred Stock Financing of
Home.connect_., a Greek corporation (the “Company”). In consideration of the time and expense
devoted and to be devoted by the Investors with respect to this investment, the No
Shop/Confidentiality provisions of this Term Sheet shall be binding obligations of the Company
whether or not the financing is consummated. No other legally binding obligations will be created
until definitive agreements are executed and delivered by all parties. This Term Sheet is not a
commitment to invest, and is conditioned on the completion of due diligence, legal review and
documentation that is satisfactory to the Investors. This Term Sheet shall be governed in all
respects by the laws of Hellenic Republic ].
Offering Terms
Closing Date: As soon as practicable following the Company’s acceptance of this
Term Sheet and satisfaction of the Conditions to Closing (the
“Closing”).
Investors: Investor No. 1: InvestorVentures. Shares 25%, €1,000,000
Amount Raised: €1,000,000
Pre-Money Valuation: The Original Purchase Price is based upon a fully-diluted pre-money
valuation of €3,000,000 and a fully-diluted post-money valuation of
€4,000,000 (including an employee pool representing 10% of the
fully-diluted post-money capitalization).
Capitalization: The Company’s capital structure before and after the Closing is set
forth on Exhibit A.
CHARTER
Dividends: The Series A Preferred will carry an annual 10% cumulative
dividend payable upon a liquidation or redemption. For any other
dividends or distributions, participation with Common Stock on an
as-converted basis.
Liquidation Preference:
In the event of any liquidation, dissolution or winding up of the
Company, the proceeds shall be paid as follows:
(full participating Preferred Stock): First pay two times the
Original Purchase Price plus accrued dividends on each share of
Series A Preferred. Thereafter, the Series A Preferred participates
with the Common Stock pro rata on an as-converted basis.
A merger or consolidation (other than one in which stockholders of
the Company own a majority by voting power of the outstanding
shares of the surviving or acquiring corporation) and a sale, lease,
transfer, exclusive license or other disposition of all or substantially
all of the assets of the Company will be treated as a liquidation event
(a “Deemed Liquidation Event”), thereby triggering payment of
the liquidation preferences described above unless the holders of
75% of the Series A Preferred elect otherwise.
Voting Rights: The Series A Preferred shall vote together with the Common Stock
on an as-converted basis, and not as a separate class, except (i) the
Series A Preferred as a class shall be entitled to elect one (1)
member of the Board (the “Series A Directors”), and (ii) as
required by law. The Company’s Certificate of Incorporation will
provide that the number of authorized shares of Common Stock may
be increased or decreased with the approval of a majority of the
Preferred and Common Stock, voting together as a single class, and
without a separate class vote by the Common Stock.
Protective Provisions: In addition to any other vote or approval required under the
Company’s Charter or Bylaws, the Company will not, without the
written consent of the holders of at least 75% of the Company’s
Series A Preferred, either directly or by amendment, merger,
consolidation, or otherwise:
(i) liquidate, dissolve or wind-up the affairs of the
Company, or effect any merger or consolidation or any
other Deemed Liquidation Event;
(ii) amend, alter, or repeal any provision of the Certificate of
Incorporation or;
(iii) create or authorize the creation of or issue any other security
convertible into or exercisable for any equity security,
having rights, preferences or privileges senior to or on
parity with the Series A Preferred, or increase the
authorized number of shares of Series A Preferred;
(iv) purchase or redeem or pay any dividend on any capital stock
prior to the Series A Preferred, or
(v) create or authorize the creation of any debt security other
than equipment leases or bank lines of credit
(vi) create or hold capital stock in any subsidiary that is not a
wholly-owned subsidiary or dispose of any subsidiary
stock or all or substantially all of any subsidiary assets; or
(vii) increase or decrease the size of the Board of Directors
Matters Requiring
Investor Director
Approval:
The prior written approval of both the Series A Directors will be
required to:
(i) make any loan or advance to, or own any stock or other
securities of, any subsidiary or other corporation,
partnership, or other entity unless it is wholly owned by
the Company;
(ii) make any loan or advance to any person, including, any
employee or director, except advances and similar
expenditures in the ordinary course of business or under
the terms of a employee stock or option plan approved by
the Board of Directors;
(iii) guarantee, any indebtedness except for trade accounts of the
Company or any subsidiary arising in the ordinary course
of business;
(iv) make any investment inconsistent with any investment policy
approved by the Board; (v) incur any aggregate
indebtedness in excess of €100,000 that is not already
included in a Board-approved budget, other than trade
credit incurred in the ordinary course of business;
(v) enter into or be a party to any transaction with any director,
officer or employee of the Company or any “associate”
(as defined in Rule 12b-2 promulgated under the
Exchange Act) of any such person except transactions
resulting in payments to or by the Company in an amount
less than €60,000 per year,
(vi) hire, fire, or change the compensation of the executive
officers, including approving any option grants;
(vii) change the principal business of the Company, enter new
lines of business, or exit the current line of business;
(viii) sell, assign, license, pledge or encumber material
technology or intellectual property, other than licenses
granted in the ordinary course of business; or
(ix) enter into any corporate strategic relationship involving the
payment contribution or assignment by the Company or
to the Company of assets greater than €100,000.00.
(x) Appoint or remove directors to/from the board of the
Company or any subsidiary companies.
Optional Conversion: The Series A Preferred initially converts 1:1 to Common Stock at
any time at option of holder, subject to adjustments for stock
dividends, splits, combinations and similar events and as described
below under “Anti-dilution Provisions.”
Anti-dilution Provisions: In the event that the Company issues additional securities at a
purchase price less than the current Series A Preferred conversion
price, then the conversion price will be reduced to the price at which
the new shares are issued.
[Pay-to-Play:
On any subsequent round all Investors are required to purchase their
pro rata share of the securities set aside by the Board for purchase by
the Investors. All shares of Series A Preferred of any Investor
failing to do so will automatically convert to Common Stock and
lose the right to a Board seat if applicable
STOCK PURCHASE AGREEMENT
Representations and
Warranties:
Standard representations and warranties by the Company.
Representations and warranties by Founders regarding technology
ownership.
Conditions to Closing: Standard conditions to Closing, which shall include, among other
things, satisfactory completion of financial and legal due diligence,
qualification of the shares under applicable laws and the filing of a
Certificate of Incorporation establishing the rights and preferences
of the Series A Preferred..
Counsel and Expenses: [Investor and company counsel to draft Closing documents.
Company to pay all legal and administrative costs of the financing at
Closing, including reasonable fees (not to exceed €20,000) and
expenses of Investor counsel
INVESTORS’ RIGHTS AGREEMENT
Management and Any Investor will be granted access to Company facilities and
Information Rights: personnel during normal business hours and with reasonable
advance notification. The Company will deliver to such Investor (i)
annual, quarterly, financial statements, and other information as
determined by the Board; (ii) thirty days prior to the end of each
fiscal year, a comprehensive operating budget forecasting the
Company’s revenues, expenses, and cash position on a month-to-
month basis for the upcoming fiscal year
Right to Participate Pro
Rata in Future Rounds:
All Investors shall have a pro rata right, based on their percentage
equity ownership in the Company (assuming the conversion of all
outstanding Preferred Stock into Common Stock and the exercise of
all options outstanding under the Company’s stock plans), to
participate in subsequent issuances of equity securities of the
Company (excluding those issuances listed at the end of the “Anti-
dilution Provisions” section of this Term Sheet. In addition, should
any [Major] Investor choose not to purchase its full pro rata share,
the remaining [Major] Investors shall have the right to purchase the
remaining pro rata shares.
(xi)
Non-Competition and
Non-Solicitation
Agreement
Each Founder and key employee will enter into a two year non-
competition and non-solicitation agreement in a form reasonably
acceptable to the Investors.
Non-Disclosure and
Developments Agreement:
Each current and former Founder, employee and consultant will
enter into a non-disclosure and proprietary rights assignment
agreement in a form reasonably acceptable to the Investors.
Board Matters: Each Board Committee shall include at least one Series A Director.
The Board of Directors shall meet at least quarterly, unless
otherwise agreed by a vote of the majority of Directors.
The Company will bind D&O insurance with a carrier and in an
amount satisfactory to the Board of Directors. Company to enter
into Indemnification Agreement with each Series A Director and
affiliated funds in form acceptable to such director. In the event the
Company merges with another entity and is not the surviving
corporation, or transfers all of its assets, proper provisions shall be
made so that successors of the Company assume the Company’s
obligations with respect to indemnification of Directors.
Vesting of Managers’
Shares:
100% of the shares directly or indirectly held by a Founder shall be
subject to a: reverse quarterly vesting over a period of four years
with a one year cliff, with a compensation in the amount of the
unvested shares; nominal value in case of a bad leaver event and in
the amount of the portion of the minimum of either the most recent
financing round or current market price in case of a good leaver
event.
"Good Leaver" means any employee shareholder who ceases to be
employed as a result of death or permanent incapacity, summary
dismissal when the dismissal is found to have been wrongful or
constructive, or whose contract of employment is terminated in
circumstances where he is not in breach of his contract. "Bad
Leaver" means any employee shareholder who is not a Good Leaver.
Key Person Insurance: Company to acquire life insurance on Founders in an amount
satisfactory to the Board. Proceeds payable to the Company.
RIGHT OF FIRST REFUSAL/CO-SALE AGREEMENT
Right of First Refusal/
Right of Co-Sale (Take-
Me-Along):
Company first and Investors second (to the extent assigned by the
Board of Directors,) will have a right of first refusal with respect to
any shares of capital stock of the Company proposed to be
transferred by Founders [and future employees holding greater than
[1]% of Company Common Stock (assuming conversion of
Preferred Stock and whether then held or subject to the exercise of
options)], with a right of oversubscription for Investors of shares
unsubscribed by the other Investors. Before any such person may
sell Common Stock, he will give the Investors an opportunity to
participate in such sale on a basis proportionate to the amount of
securities held by the seller and those held by the participating
Investors.1
VOTING AGREEMENT
Board of Directors: At the initial Closing, the Board shall consist of 5 members.
Drag Along: Holders of Preferred Stock and the Founders shall be required to
enter into an agreement with the Investors that provides that such
stockholders will vote their shares in favor of a Deemed Liquidation
Event or transaction in which 50% or more of the voting power of
the Company is transferred and which is approved by the holders of
75% of the outstanding shares of Preferred Stock, on an as-
converted basis (the “Electing Holders”).
Tag Along: Holders of Preferred Stock and the shall have a tag along right in
case any other shareholder wishes to sell or otherwise dispose of
1 Certain exceptions are typically negotiated, e.g., estate planning or de minimis transfers. Investors may also
seek ROFR rights with respect to transfers by investors, in order to be able to have some control over the composition of the investor group.
shares in the company.
OTHER MATTERS
No Shop/Confidentiality: The Company agrees to work in good faith expeditiously towards a
closing. The Company and the Founders agree that they will not,
for a period of 24 weeks from the date these terms are accepted, take
any action to solicit, initiate, encourage or assist the submission of
any proposal, negotiation or offer from any person or entity other
than the Investors relating to the sale or issuance, of any of the
capital stock of the Company or the acquisition, sale, lease, license
or other disposition of the Company or any material part of the stock
or assets of the Company and shall notify the Investors promptly of
any inquiries by any third parties in regards to the foregoing. [In the
event that the Company breaches this no-shop obligation and, closes
any of the above-referenced transactions without providing the
Investors the opportunity to invest on the same terms as the other
parties to such transaction, then the Company shall pay to the
Investors €300,000 upon the closing of any such transaction as
liquidated damages. The Company will not disclose the terms of
this Term Sheet to any person other than officers, members of the
Board of Directors and the Company’s accountants and attorneys
and other potential Investors acceptable to InvestorVentures as lead
Investor, without the written consent of the Investors.
Expiration: This Term Sheet expires on April 21, 2015 if not accepted by the
Company by that date.
EXECUTED THIS 21TH DAY OF MARCH 2015
[SIGNATURE BLOCKS]
EXHIBIT A
Pre and Post-Financing Capitalization
Pre-Financing Post-Financing
Security # of Shares % # of Shares %
Common – Founder 1 600 55,2% 600 35,9% Common – Founder 2 400 36,8% 400 23,9% Common – Angel Investor 87 8% 87 5,2% Common – Employee Stock Pool
0 0% 167 10%
Series A Preferred
0 0 417 25%
Total
1087 100% 1673 100%