Video series: How investor term sheets work (Series A term sheet breakdown)

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When you’re fundraising for a startup, chances are you’ll have to negotiate a term sheet with investors. Unfortunately, the language in these documents can be complex, overwhelming, and difficult to understand—and with precious little time to close the deal, it can become time-consuming and expensive to work through every section of the term sheet with your legal advisors.

Luckily, at Carta, we have some very smart friends. In this video series, we linked up with Mike LaPlante—an experienced startup attorney at Perkins Coie—to break down a Series A term sheet in plain English. We hope they give you helpful context to move deals along quickly (and avoid wasting time and legal fees).

Part 1: The offering terms

In the first episode of our deep dive, Mike breaks down section 1 of a Series A term sheet, the offering terms. We learn:

  • The difference between the stated pre-money valuation in the term sheet, and the effective pre-money valuation after all mathematical factors have been considered.
  • How the size of the option pool can be an important negotiation lever for the investor.

 

Part 2: The charter

Now that we understand the offering terms, Mike takes us into the second section of our Series A term sheet, the charter. We learn about:

  • The charter: a list of rights your preferred shareholders are entitled to after you accept money from them.
  • How much equity investors typically expect to take when they invest in your Series A.
  • Protective provisions, the specific actions you need investor permission for.

 

We’re not done with Mike—parts 3 and 4 will be coming soon!

At Carta, we help startups with fundraising, compensation, valuations, equity management and much more. Talk to us to find out how we can help you grow.

 

DISCLOSURE: This communication is on behalf of eShares Inc., d/b/a Carta Inc. (“Carta”).  This communication is for informational purposes only, and contains general information only.  Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services.  This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests.  Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor.  This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. ©2021 eShares, Inc. d/b/a Carta, Inc. (“Carta”). All rights reserved. Reproduction prohibited.

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