ACA Syndication Webinars

Transcription

1 ACA Syndication Webinars Negotiating and Harmonizing Term Sheets April 28,

2 Thank you to our sponsors & partners: Speakers: Frank Peters: Member and Former Chair, Tech Coast Angels (CA) James Geshwiler: Managing Director, CommonAngels (MA) Michael Gruber: Managing Director, Cornerstone Angels (IL) Katherine O Neill: Managing Director, Jumpstart New Jersey Angels (NJ) David Rose: Founder and Chair, New York Angels (NY) 2

3 Discussion Points: Syndication in a Federation Syndicating Strategically Clearing the Table before the Terms Working well with others is Key Open Q/A Please submit questions and comments via text throughout the Webinar. 3

4 Syndication Baked In Tech Coast Angels

5 Getting it Done Due Diligence Term Sheet Another Road Show 5

6 Term Sheets All Volunteer Standard Term Sheet, Except 6

7 Liquidation Preference 7

8 James Geshwiler Managing Director - CommonAngels Founding Chair Angel Capital Education Foundation Syndication Strategy Lead investor should pick syndicate prospects wisely Big value add for entrepreneur, investors Good actors: High strategic value, clear process, decisive Bad actors: Just money, murky/no process, indecisive 8

9 Michael Gruber Founder & Managing Director Cornerstone Angels Discovery Prior to Term Sheet 9

10 Skeletons & Hidden Elements Options & Employee Agreement Management/Founder Loans Existing Convertible Notes Trade Payables Investor & Founder/Management Balance Investment Dollars for Maximizing Value Not paying down loans or older issues Founders/Management want to retain upside Also to be compensated for out-of-pocket $ 10

11 Options and Employment Agreements Making sure management is properly incented May need to increase option pool Investors may also require that management re-earn their equity through vesting Management/Founder Loans Establish a side letter from note holders for the conditions their loans will paid back Should be long term view, and with money being paid back after company in strong financial position Investors might require that all or portion of loans be converted into equity 11

12 Other Notes, Payables, etc. Triage payments Simplify/clean-up capitalization Convert outstanding convertible instruments into current offering Stop interest accrual Level outstanding liquidation preferences Katherine O Neill Managing Director Jumpstart New Jersey Angels 12

13 We invest in high-growth technology businesses We syndicated with many regional groups Parallel or combined processes Deal terms are important but group interaction is KEY to success All groups funding is critical to make a successful investment 13

14 Share Toys Participants in syndication should get same terms (within reason) Share information openly talk vs. write: schedule weekly call Time out for poor behavior Change a deal team syndicate leader who can t cooperate 14

15 One group runs the deal for several groups and will get back to all but never does Lack of information and cooperation will kill the syndication 15

16 Don t Rain on Someone s Parade There are more than 1,000 ways to kill a deal In the early stages, unless there is something fatal about the deal, let other groups make their own decisions Share objective info, then weigh in on your group s lack of interest 16

17 Why did this group not participate? Why did this group like the deal? What do deal partners say about another group? Makes you a better partner in the future or able to source the right deal to other groups 17

18 David Rose Founder & Chair New York Angels 18

19 RESOURCES: Series Seed: Seed Series Lighter Term Sheet Dan Rosen: Alliance of Angels Model Term Sheet Basil Peters: Angel Term Sheet Evolution - with Dan Rosen VentureHype: What da heck is liquidation preference? Part 1 What da heck is liquidation preference? Part 2 Alex Wilmerding: Terms and Valuations A line by line look... Please review additional tools and materials on the ACA Web site. ACA Syndication Webinar Series Syndication Basics Why, How, and When: March 3 Negotiating and Harmonizing Terms Sheets: April 28 Conducting and Sharing Due Diligence: May 26 Case Studies in Syndication: June