STARTUP LEGAL

Founder Institute session

2013-05-20

Agenda

• How Founding Works?

• Documentation

Stages of Founding

• Internal founding

– Founder

– Co-Founders

– Friends and Family (…and Fools)

• External founding

– Seed round

– Round A, B…

– IPO

Internal founding

Founder

PLN 0

Founder100%

$

Stages

Internal founding

Co-founders

PLN 10,000

Founder50%

Co-Founder

50%

$

Stages

Internal founding

Family&Friends

PLN 20,000

Founder37,5%

Co-Founder

37,5%

Uncle5,0%

Option pool

20,0%

$

Stages

External founding

Seed round

PLN 200 k

(at PLN 1 M valuation)

Founder31,2%

Co-Founder

31,2%

Uncle4,2%

Seed fund

16,7%

Option pool

16,7%

$

Stages

External founding

Round A

PLN 2 M

(at PLN 4 M valuation)

Founder19,2%

Co-Founder

19,2%

Uncle2,6%

Seed fund

10,3%

First employee

1,8%

VC33,3%

Option pool

13,6%$

Stages

External founding

IPO

PLN 235 M

(at PLN 2,6 bln valuation)Founder

17,6%

Co-Founder

17,6%

Uncle2,4%

Seed fund9,5%

First employee

1,7%

VC30,5%

Public8,3%

Option pool

12,4%

$

Stages

Agenda

• How Founding Works?

• Documentation

US vs PL documents

USA

• Term Sheet

• Stock Purchase Agreement

• Certificate Of Incorporation

• Investor Rights Agreement

• Voting Agreement

• Right of First Refusal and Co-

Sale Agreement

• Management Rights Letter

• Indemnification Agreement

• Model Legal Opinion

PL

• „Term Sheet” - opcjonalnie

• Umowa inwestycyjna

• Zmiany do umowy spółki

Term sheet

• A term sheet is a bullet-point document outlining the material

terms and conditions of a business agreement

– It implies the conditions of a business transaction

• A term sheet generally covers the more important aspects of a

deal, without going into every minor detail and contingency

covered by a binding contract

– For example, a term sheet from a venture capital company that is

investing in an early-stage company may contain such details as: the

amount of investment, the percentage stake sought, anti-dilutive

provisions and valuation

• Used to prepare final agreement

– Binding (all terms are obligatory)

– Non binding (it guides, but is not necessarily binding the final terms of

their agreement)

Term sheet should include:

• Closing Date

• Investors

• Money raised (the investment)

• Price Per Share

• Pre-Money Valuation

• Capitalization (structure of capital)

• Additional Clauses (optionally):

– Dividends

– Voting Rights

– Drag-along rights („Pociągnięcie”)

– Tag-along rights („Przyłączenie”)

– Liquidation Preference

– Participation Preference

– Anti-dilutive

– Clawback

– ect.

THANK YOU

marcin.zabielski@hedgehogfund.pl

Sources

Sources

• http://en.wikipedia.org/wiki/Term_sheet

• http://nvca.org/index.php?option=com_content&view=article&id=10

8&Itemid=136

• http://www.investopedia.com/