In August, I was fortunate to be interviewed by Omar Valdez-de-Leon of Latitude 55° Consulting in Copenhagen about a better way to do corporate venture capital by aligning with corporate innovation strategy and digital ecosystem goals. Omar is a known practitioner of digital transformation, having advised companies such as Ericsson, CGI, Honeywell, Cemex, Bosch, Vodaffone, Bell Canada, and more. He is an authority on digital ecosystems, authoring papers about how to develop digital ecosystems, organizing for digital, and the Digital Maturity Model.
I managed a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. Of the six documents, Sam Altman’s personal term sheet is the most compatible with Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
Comparison of Sam Altman’s personal term sheet with Founder Friendly Standard
Review written by Jennifer Rohleder, Principal of J. Rohleder Law, on July 25, 2019.
I orchestrated a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. Y Combinator Safes are silent on a number of important issues. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
Many founders don’t realize how much of a company they’re giving away with YC Safes
Review written by Ryan Juliano, Vice President, Head of Platform, and Attorney at Howell Legal on June 6, 2019.
When I refer to YC Safes, I’m talking about all four variants. The only difference between the Safes in this comparison occurs in Section 1.5 below on the topic of anti-dilution.
I organized a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. 500 Startups KISS Notes are silent on a number of important issues. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
500 Startups KISS Notes are silent on important legal issues for startups
Review written by Zev Safran of Safran Law on June 25, 2019.
500 Startups KISS Notes are investment templates meant to enable early stage startups to raise money without a lengthy negotiation of legal terms. I reviewed both variants of 500 Startups KISS Notes to write this comparison to Founder Friendly Standard.
KISS: Debt Version (which includes an interest rate and a maturity feature)
I conducted a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The Y Combinator (“YC”) Series A Term Sheet Template was not the most founder-friendly nor was it the least. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
I led a study in 2019 where attorneys reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The NVCA Model Legal Documents were the least compatible with the Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
Many default sections in the NVCA Model Legal Documents are not founder-friendly
Review written by Keith Strahan, Managing Partner at Fulton Strahan Law Group, on Oct 14, 2019.
NVCA Model Legal Documents can be very time-consuming and expensive to negotiate and document. They include 18 agreements. To write this answer, my associate, Josh Mathews, and I reviewed the following six documents:
I led a study in 2019 with attorneys who reviewed the six most popular startup financing documents—all of which were produced by investor-funded organizations. After pouring through 298 pages of legalese, the attorneys found the top six financing documents were, on average, only 38% compatible with Founder Friendly Standard. The Gust Series Seed Term Sheet was one of the least compatible with the Founder Friendly Standard. See for yourself by viewing our infographic where you can drill down and compare the term sheets.
Gust Series Seed Term Sheet does not guarantee founders any control of their companies
Review written by Jennifer Rohleder, Principal of J. Rohleder Law, on July 25, 2019.
If you can muster the patience to build what John W Mullins calls a customer-funded business, you can reject the terms of the Gust Series Seed Term Sheet that you don’t like. (Always consult with an attorney when negotiating a term sheet.)
An ecosystem innovation fund, or “EIF,” is a seed fund for startups. EIFs are a hybrid of corporate venture capital and the US government’s Small Business Innovation Research grant program, or “SBIR.” EIFs combine the best from both models to create a new vehicle for large companies to invest in innovation in their digital ecosystems.
Figure 1. Where does an ecosystem innovation fund (EIF) fit within your corporate innovation strategy?Continue reading →
Non-competes can advance the interests of investors to the detriment of entrepreneurs. That is why Founder Friendly Standard section 2.5 limits non-competes to the period of a founder’s work for the company, making it possible for a founder to earn a living in his/her industry after he/she leaves.
Venture capitalists and angel investors can say they are founder-friendly. But their
“standard” term sheets and funding agreements may tell a different story.
Four attorneys with deep expertise in startup fundraising weighed in during a roundtable discussion with me, Eisaiah Engel, co-author of Founder Friendly Standard, a checklist for entrepreneurs to address all the “other” terms in a financing besides valuation and percentage of the company purchased. The attorneys shared their insights on what makes a term sheet founder-friendly, how “standard” term sheets compare to each other, and how to avoid my past mistakes when negotiating venture financing.
INFOGRAPHIC: The attorneys in this roundtable discussion contributed to this infographic comparison of the six most popular startup financing templates (Y Combinator Safes and Series A, NVCA Model Legal Docs, Gust Series Seed, Sam Altman’s personal term sheet, and the 500 Startups KISS).
