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Survive the Term Sheet Negotiation and Investor Due Diligence Part 1

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The post Survive the Term Sheet Negotiation and Investor Due Diligence Part 1 appeared first on Gust. There is a different kind of stock that investors can choose to purchase, called preferred stock. While the name makes it seem preferable to common stock, preferred is not inherently better, it’s just different. Here’s why.

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Survive the Term Sheet Negotiation and Investor Due Diligence Part 2

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The post Survive the Term Sheet Negotiation and Investor Due Diligence Part 2 appeared first on Gust.

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Keep Term Sheets Simple for Quicker Cash to Spend

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Remember a term sheet agreement is not a deal until the check clears. However, there is no set pattern of terms an entrepreneur might be able to anticipate from either. Your best strategy is to bring your own term sheet to the negotiation as a starting point.

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Control Depends More on Results Than Term Sheets

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Whether we’re founders or investors, we focus on terms and percentages as determining control. Fred Wilson of Union Ventures writes Entrepreneurs Have Control When Things Work, VCs Have Control When They Don’t on his AVC blog. This is one of those ideas that seem completely obvious but only after I’ve heard them.

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Reflection on Local Angel Investment From Inside Out

Gust

We have a standard term sheet as a starting point. We’ve never seen that term sheet survive negotiations all the way through signing, but it’s usually a good start. We like the local connection. . We try to make our investments as convertible debt.

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Investors: Avoid These Investment Event Problems

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Angel investment events where the group investment is supposed to go to the winner, but the winner ends up hating the term sheet. Usually these term sheets involve convertible notes, which are supposed to convert to equity at the next round of financing, like when the serious venture capitalists do a Series A.

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What are some key points to look for when reviewing an investment offer in your startup?

Gust

Once you’ve settled on the investor, only then should you worry about the terms of the investment. A term sheet is not necessarily rocket science, and with enough time and effort can be understood by anyone. So start now, and help yourself by getting up to speed on what all the parts of a term sheet mean.