TheFunded “Standard” Term Sheet
There has been a lot of blog chatter about TheFunded’s form term sheet, including here, here and here. The sentiment from VCs has been generally positive with some saying that a return to balance for founders has been a long time coming. The WSJ queried whether VCs would put their money where their mouths are. I would be interested in your opinion. I think the term sheet makes too many assumptions and is unlikely to be used as a form.
I wonder what the standard startup looks like that would receive this term sheet as its currently drafted? In my admittedly limited experience (having worked on 20 or so venture financings), I just can’t imagine a VC saying, “we want to invest in this standard startup, let’s use TheFunded form term sheet”. That’s just not how it works. A term sheet consists of many levers, or terms, used to satisfy an investor’s risk/reward investing requirements. For instance, if the company is asking for a valuation that an investor perceives as high, maybe they give and make up the risk with a greater liquidation preference. The point being, these deals aren’t standard.
Some comments on the term sheet: Why did they include registration rights? It is unlikely those will come into play, and for a “simple” seed term sheet, seem superfluous. The net-net is most founders would be happy to receive a term sheet with a 1x non-participating preference and full acceleration upon a change of control while maintaining board control, too bad few are going to receive one.
