One of the most exciting moments in the life of every newly christened founder is the sweet relief of seeing a term sheet come in from an investor. After weeks, perhaps months (but hopefully not years!), of work fundraising and pitching, there is nothing like getting that email with a PDF attached to it laying out the terms and conditions of the VC relationship going forward.
Of course, that rejoicing dampens quickly as all the specific nuances of the deal suddenly come to the forefront. It’s one thing to get the valuation you want, or the amount of capital you are seeking, but what about the setup of the board of directors? What should you do about deal terms that may shape your startup for a decade or more?
The reality of term sheets, as our guest Lior Zorea discusses, is that the terms you agree to early on at a startup tend to be the terms that will carry through for the life of the company. That means getting that first term sheet right is critical for ensuring the financial and capital success of your business.
That’s why we were thrilled to have Zorea and his legal training with us at Early Stage recently, where he discussed what VCs want in a term sheet, the kinds of terms that can trip up founders, particularly at the seed and Series A rounds, and his framework for how to think holistically about the entire fundraise process to closing.
Zorea is a partner at Nixon Peabody where he leads the West Coast Emerging Companies and Venture Capital practice. Over his lengthy legal career, he has been involved in all kinds of financial transactions, from startup financings to IPOs and acquisitions. He’s also worked with startups across pretty much every market vertical you can imagine.
For those who missed his talk live, we have embedded the video below. Definitely tune in, and remember to rewatch when you get that first legal doc in your inbox.
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