Review of Sam Altman’s Personal Term Sheet

Jennifer Rohleder reviews Sam Altman's personal term sheet for startup investing

How founder-friendly is it?

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.

Below, you’ll see how Sam Altman’s Personal Term Sheet compares to Founder Friendly Standard. I wrote this review to help startup founders critically evaluate the issues in term sheet templates.

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Review of Y Combinator Safes

Ryan Juliano attorney review of YC Safe Notes

How founder-friendly are they?

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.

The below review of the Y Combinator (YC) Safes compares them to the Founder Friendly Standard. Y Combinator publishes four variants of post-money Safes:

  1. Valuation Cap, no Discount
  2. Discount, no Valuation Cap
  3. Valuation Cap and Discount
  4. MFN, no Valuation Cap, no Discount

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.

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Review of 500 Startups KISS Notes

Zev Safran: Comparison of 500 Startups KISS Notes to Founder Friendly Standard

How founder-friendly are they?

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.

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.

When I refer to 500 Startups KISS Notes, I’m talking about both variants.

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Review of Y Combinator Series A Term Sheet Template

Six attorneys compare popular investment agreements side-by-side to Founder Friendly Standard

How founder-friendly is it?

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.

Y Combinator Term Sheet - Comparison to Founder Friendly Standard.
Click each box in the interactive version for analysis.

Founders who want to be their own bosses shouldn’t use the YC Series A Term Sheet Template

Review written by K. Adam Bloom, Startup and Entertainment Attorney, on September 7, 2019.

To write this comparison, I used the Founder Friendly Standard to grade the Y Combinator Series A Term Sheet Template.

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Review of NVCA Model Legal Documents

Keith Strahan - Attorney comparison of NVCA Model Legal Docs to Founder Friendly Standard

How founder-friendly are they?

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.

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:

  1. NVCA Voting Agreement
  2. NVCA Term Sheet
  3. NVCA Stock Purchase Agreement
  4. NVCA Right of First Refusal and Co-Sale Agreement
  5. NVCA Investor Rights Agreement
  6. NVCA Certificate of Incorporation

To write this review, we started with each issue in the Founder Friendly Standard and compared it to the NVCA Model Legal Docs.

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Review of Gust Series Seed Term Sheet

Jennifer Rohleder's review of Gust Series Seed Term Sheet

How founder-friendly is it?

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.)

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What is an Ecosystem Innovation Fund (EIF)?

Diagram showing an ecosystem innovation fund (EIF) branching off from non-core innovation. The overall diagram shows the pieces of a corporate innovation strategy.

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.

Diagram showing an ecosystem innovation fund (EIF) branching off from non-core innovation. The overall diagram shows the pieces of a corporate innovation strategy.
Figure 1. Where does an ecosystem innovation fund (EIF) fit within your corporate innovation strategy?
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Should a startup founder agree to a non-compete?

Jennifer Rohleder's review of Gust Series Seed Term Sheet

Hell no. Are you kidding me?

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.

In 2019, I led a study where attorneys compared popular term sheets to Founder Friendly Standard. The below videos were produced during the study and originally posted on Quora. Other noteworthy outputs from the study include this infographic comparison and this attorney roundtable discussion.

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Attorney Roundtable: How founder-friendly are “standard” VC term sheets?

Jennifer Rohleder, Keith Strahan, Zev Safran, and Ryan Juliano

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).

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“Standard” term sheets are only 38% founder-friendly

Side-by-side comparison of "standard" term sheets to Founder Friendly Standard

Y Combinator Safe, 500 Startups KISS, and other “standard” term sheets cannot claim they are founder-friendly, reveals study by 6 startup attorneys.

Six attorneys compare popular investment agreements side-by-side to Founder Friendly Standard
Click each box in the interactive version for analysis.

Nearly every hour of my spare time since May 2019 has gone into this research study to determine if “standard” term sheets really are founder-friendly. It feels amazing to be finished! Here is what we found.

Six attorneys analyzed 298 pages of legalese from:

  1. Y Combinator Safes
  2. 500 Startups KISS notes
  3. NVCA Model Legal Docs
  4. Gust Series Seed term sheet
  5. Sam Altman ‘Founder-Friendly’ term sheet
  6. Y Combinator Series A term sheet

Compared to Founder Friendly Standard®, a framework for determining if a venture capital or angel investment deal is founder-friendly, the above “standard” term sheets and contract templates were on average:

  • A little more than a third (38%) founder-friendly as defined by being compatible with Founder Friendly Standard.
  • Just under a third (32%) founder-unfriendly as defined by being incompatible with Founder Friendly Standard.
  • Nearly a third (30%) silent on the issues in Founder Friendly Standard.
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