A Lunch and Learn Session delivered by MLA Member Rob Koturbash on Term Sheets in Angel Investing.

1. A n I n t r o d u c t i o n t o Te r m S h e e t s
With Rob Koturbash
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

2. Term Sheets – an Introduction
• A term sheet is the basis of a legal agreement
between an investor(s) and a company,
outlining the terms and conditions of an
investment into the target company.
www.mapleleafangels.com
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info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

3. Goals
• Hope for the best but plan for the worst
• Protect downside risk while maximizing upside
potential
• Forms the basis of a legal document
• Aligns interests of founders with interests of
investors
• Establishes corporate governance
www.mapleleafangels.com
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info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

4. Critical Items
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What do you want the deal to look like?
Type of security to be issued
Valuation and amount to be invested
Voting and information rights
Board establishment and representation
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

5. Types of Investment
• Equity
– Common
– Preferred
• Debt
– Straight
– Convertible
• Angel investments capture upside reward,
therefore Equity or Convert Debt are
instruments used
www.mapleleafangels.com
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info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

6. Seed Preferred Structure
• Allows upside value capture
• Introduces set of rights available only to
investors
– Anti dilution
– Investor board seats
– Information rights
– Redemption rights
– Rights related to future investment rounds
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

7. Aligning Interests between
Investors and Founders
• Identify key value drivers in the investment
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Product launch
IP strategy
Strategic partnerships
Sales targets
• Focus on two or three key metrics
• Upon value creation event, management can claw
back a portion of equity if they have demonstrated
superior execution
– Warrant structure
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

8. Corporate Governance
• Goal is to achieve a balanced board from the
start
• 5 person board minimum – 3 person boards do
not work
• Expandable easily to 7
– Current CEO
– Founder representative
– 2 Investor representatives
– Independent
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels

9. C O N TA C T
R o b Ko t u r b a s h
r ko t u r b a s h @ m a p l e l e a fa n g e l s . c o m
www.mapleleafangels.com
|
info@mapleleafangels.com |
416.646.6235 |
@mapleleafangels