On Termsheets

1. Angel Camp
18 August 2014
Anne Veerpalu

2. Who am I?
•13 yrs corporate law & M&A experience
•last few years consulting startup entrepreneurs
•member of the Estonian Bar Association
•recent member of EstBAN
•lecturer of business law at Estonian Business School
•founder in a selection of companies
•initiator and creator of www.legalbooster.com
•advisor to founders of crowdfunding platform www.fundwise.me
•currently setting up Legal Angel Fund and innovating legal services

3. Business angel deal terms
•No study available of terms of angel deals in Estonia
•EstBAN to collect deal data?
•EstVCA –VC deal data?
•Similar to M&A Deal Point Study available: http://www.sorainen.com/UserFiles/File/Baltic%20MA%20Deal% 20Point%20Study%202013.pdf
•What legal doc template the EstBAN members use in angel deals?

4. Legal doc templates
•EstVCA plan to publish legal doc templates
Any data on use of these?
•EstBAN has a legal support member Hedman Law Offices –legal doc templates available
Any experience or comments of use of these?
•LatBAN?

5. Legal doc templates
There are many legal doc templates for PE & VC deals out there
•Seedsummit:
http://seedsummit.org/termsheets/(author Tina Baker of JAGShaw Baker)
•SeriesSeed:
http://www.seriesseed.com/(author Ted Wang of Fenwick & West)
•TechStars: http://www.techstars.com/techstars-model-seed-funding-documents/
http://www.techstars.com/docs/
•Y-Combinator:
http://www.ycombinator.com/documents/(author previous WSGR lawyer)
•Founders Institute:
http://fi.co/posts/69http://www.docstoc.com/docs/10303638/FFI-Plain-Preferred-Term-Sheet

6. Legal doc templates
One made by one lawyer, other made by another and a comparison by a third lawyer
•http://www.startupcompanylawyer.com/2010/03/14/how-do-the- sample-series-seed-financing-documents-differ-from-typical-series- a-financing-documents/
Andreesen recommends SeriesSeed:
•http://www.pehub.com/2010/03/marc-andreessen-on-series-seed- documents-and-why-vcs-should-start-using-them/

7. Not only law firms
NVCA -US
•http://www.nvca.org/index.php?option=com_content&view=article&id=108&Itemid=136
•50+ lawyers participated
•Jason Mendelson, VC:
“... see theNVCA model documents(I’ve been in the room while they have been drafted).While the documents are great in that every potential scenarios has been imagined (and even more importantly to show you what should never be included in financing documents by their omission), the documents are too complicated for 90% of the folks out there doing the deals.”

8. British VCA
BVCA –UK (so not only US phenomena)
•http://www.bvca.co.uk/ResearchPublications/StandardIndustryDocuments/Modeldocumentsforearlystageinvestments.aspx
“We intend to:
•collate all input received from consultation over this month with 28 February being our deadline for initial feedback;
•hold a seminar on 6 March 2014 from 2pm-4pm at Taylor Wessingto allow discussion, feedback and queries;
•publish the templates formally in September 2014(We are currently seeking Counsel’s opinion on whether the model agreement should be signed as a deed or under hand.);
•combine this with a publicity campaign to ensure the widest possible take-up of the documents (your ideas on achieving this are very welcome); and
•ensure continuous improvement in the documents, by holding regular review and update sessions thereafter.
If you are interested in submitting feedback and/or attending the seminar, or if you have ideas on how best to ensure the widest possible take-up of these documents by the venture community, please contact GurpreetManku(gmanku@bvca.co.uk).”

9. Legal doc templates
•Is it possible to choose or make the best one?
Brad Feld, VC
•http://www.feld.com/archives/2010/03/the-proliferation-of- standardized-seed-financing-documents.html
Jason Mendelson, VC
•http://www.jasonmendelson.com/wp/archives/2010/03/why- there-will-never-be-a-standard-set-of-seed-documents-a-k-a-why- brad-feld-will-fail.php
•Reasons why not?

10. Legal doc generators
•http://www.jasonmendelson.com/wp/archives/2010/11/brightleaf- automates-the-nvca-model-documents-a-k-a-why-brad-feld-will- succeed.php
•BrightLeaf-http://vimeo.com/51657230
WSGR Term Sheet Generator
•http://www.startupcompanylawyer.com/2009/04/22/wsgr-online- venture-financing-term-sheet-generator
Orrick Termsheet Creator
•https://tsc.orrick.com/
Contracts automators
•http://www.business-integrity.com/technology/contractexpress- author/

11. Human-vs lawyer-readable text?
Trend is to produce two versions:
•Legal text
•Human readable summaryhttp://webtechlaw.com/2011/09/09/human-readable-legalese- html/
Passion Capital
http://www.passioncapital.com/-early stage VC firm
Human-readable termsheethttps://www.dropbox.com/s/pc0208kjk3jti7c/20130620%20Passion%20Capital%20Plain%20English%20Term%20Sheet.pdf

12. Presumptions and question
Presumptions:
•The legal know-how in this room is of very different levels
•Some very experienced and some not
•Angels and VCs are presumed to know how to draft termsheets much better than entrepreneurs
Questions:
•Is it true in EE, LV and FIN?
•Do you really need lawyers anymore or can generators and human- readable legal docs do the trick?
A Scottish lawyer Richard Susskind is entertaining on this topic www.susskind.com

13. Final advice for an angel
•focus on making it simple
•share your rapsheet and experience
•standardize your termsheet and let it live
•have a schedule for the deal
•don’t be a proctologist
•stick to what you have agreed
At the end of the day it is your legacy, track record and reputation