This new book of investor Harm de Vries and VC lawyers Menno van Loon and Sjoerd Mol, who together have been involved in hundreds of venture capital transactions, explains all of the most common clauses used in VC deals.
The book provides an in-depth look on how venture capital deals are constructed and how deal terms work out in practice. It includes many examples, as well as negotiation tips for both entrepreneurs and investors and a full term sheet template as annex.
Furthermore, the book explains the economics behind the deal terms, which makes them easier to understand. The result is a practical guide to venture capital deals.
All venture capital transactions start out with the execution of a term sheet, a document summarizing the basic terms and conditions under which a potential investment will be made. A well-drafted term sheet serves as a tool to focus attention of the parties on the essential deal terms, and serves as an instrument to investigate whether there is common ground between them with respect to the most important investment conditions before they spend further time, energy and money on negotiating a deal. Effective participation in the negotiations of a venture capital transaction is possible only once each party involved fully understands the scope and consequences of all the deal terms included in the term sheet.
The book provides a clear understanding of the most frequently used practices, terms and conditions and will benefit anyone involved in venture capital transactions - investor, entrepreneur or advisor.
Contents of the book:
About the authors
Preface
1. Introduction
- Structure of the book
- Investment process
2. New wave energy case study
- Incorporation
- Seed round
- Series A round - early stage phase
- Series B round - growth phase
- Series C round - further growth
- IPO (Initial Public Offering)
3. New wave energy term sheet
4. Terms explained
- Issuer
- Amount of Financing
- Milestones
- Investors
- Type of security
- Warrant coverage
- Share price and valuation
- Capital structure
- Anticipated closing date
- Dividends
- Redemption
- Voluntary conversion
- Automatic conversion
- Anti-Dilution
- Pay-to-Play
- Liquidation preference
- Favourable terms
- Board representation
- Voting rights
- Consent rights
- Registration rights
- Representation and warranties
- Information rights
- Use of proceeds
- Pre-Emptive rights
- Rights of first refusal
- Co-Sale rights
- Drag-along rights
- Management board
- Employee pool
- Vesting scheme
- Founders’ shares
- Lock-up
- Employments relationship
- Non-Competition/Non-Solicitation
- Non-Disclosure agreements
- Assignment inventions
- Key man insurance
- Agreements at closing
- Fees and expenses
- Confidentiality
- Exclusivity/No-Shop
- Governing Law
- Non-Binding character
- Indemnities
- Conditions precedent
- Expiration
Annexes
Annex 1: Term sheet template
Annex 2: Profit and loss account and cash flow statement
Annex 3: Glossary of terms
Annex 4: IRR analysis: Years invested vs. Return Multiple
The book provides an in-depth look on how venture capital deals are constructed and how deal terms work out in practice. It includes many examples, as well as negotiation tips for both entrepreneurs and investors and a full term sheet template as annex.
Furthermore, the book explains the economics behind the deal terms, which makes them easier to understand. The result is a practical guide to venture capital deals.
All venture capital transactions start out with the execution of a term sheet, a document summarizing the basic terms and conditions under which a potential investment will be made. A well-drafted term sheet serves as a tool to focus attention of the parties on the essential deal terms, and serves as an instrument to investigate whether there is common ground between them with respect to the most important investment conditions before they spend further time, energy and money on negotiating a deal. Effective participation in the negotiations of a venture capital transaction is possible only once each party involved fully understands the scope and consequences of all the deal terms included in the term sheet.
The book provides a clear understanding of the most frequently used practices, terms and conditions and will benefit anyone involved in venture capital transactions - investor, entrepreneur or advisor.
Contents of the book:
About the authors
Preface
1. Introduction
- Structure of the book
- Investment process
2. New wave energy case study
- Incorporation
- Seed round
- Series A round - early stage phase
- Series B round - growth phase
- Series C round - further growth
- IPO (Initial Public Offering)
3. New wave energy term sheet
4. Terms explained
- Issuer
- Amount of Financing
- Milestones
- Investors
- Type of security
- Warrant coverage
- Share price and valuation
- Capital structure
- Anticipated closing date
- Dividends
- Redemption
- Voluntary conversion
- Automatic conversion
- Anti-Dilution
- Pay-to-Play
- Liquidation preference
- Favourable terms
- Board representation
- Voting rights
- Consent rights
- Registration rights
- Representation and warranties
- Information rights
- Use of proceeds
- Pre-Emptive rights
- Rights of first refusal
- Co-Sale rights
- Drag-along rights
- Management board
- Employee pool
- Vesting scheme
- Founders’ shares
- Lock-up
- Employments relationship
- Non-Competition/Non-Solicitation
- Non-Disclosure agreements
- Assignment inventions
- Key man insurance
- Agreements at closing
- Fees and expenses
- Confidentiality
- Exclusivity/No-Shop
- Governing Law
- Non-Binding character
- Indemnities
- Conditions precedent
- Expiration
Annexes
Annex 1: Term sheet template
Annex 2: Profit and loss account and cash flow statement
Annex 3: Glossary of terms
Annex 4: IRR analysis: Years invested vs. Return Multiple
