developed by Gust, the platform powering over 90% of the organized angel investment groups in the United States.
The goal was to standardize on a single investment structure, eliminate confusion and significantly reduce the costs of negotiating, documenting and closing an early stage seed investment.
For those familiar with early stage angel transactions, this middle-of-the-road approach is founder-friendly and investor-rational, intended to strike a balance between the Series A Model Documents developed by the National
Venture Capital Association that have traditionally been used by most American angel groups (which include a 17 page term sheet and 120 pages of supporting documentation covering many low-probability edge cases), and the one page Series Seed 2.0 Term Sheet developed in 2010 by Ted Wang of Fenwick & West as a contribution to the early stage community (which deferred most investor protections and deal specifics until future financing rounds.)
The Gust Series Seed Term Sheet does meet Section 2.2 of the Founder Friendly Standard. The term sheet providesfor "reverse vesting"so the company can repurchase unvested stock if a Founder leaves before four years.
California Gust Series Seed Term Sheet is a legal document that outlines the terms and conditions for a seed investment round in a startup company. The seed term sheet serves as a preliminary agreement and lays the foundation for negotiations between the startup and potential investors in California. The California Gust Series Seed Term Sheet is intended to protect the rights and interests of both the startup and the investor. It typically includes key provisions such as valuation, investment amount, investor rights, liquidation preferences, anti-dilution provisions, board composition, and voting rights. There are different types of California Gust Series Seed Term Sheets that cater to specific circumstances and preferences. Some common variations include: 1. Standard Term Sheet: This type of term sheet follows the traditional structure and includes standard provisions to ensure mutual understanding between the startup and investor. 2. Simple Agreement for Future Equity (SAFE) Term Sheet: SAFE term sheets are often used in seed-stage financing and are simpler than traditional equity-based term sheets. They provide for the right to purchase equity in the future at a predetermined valuation. 3. Convertible Note Term Sheet: Convertible notes are debt instruments that can later be converted into equity. The term sheet for a convertible note includes provisions related to interest rates, maturity, conversion terms, and repayment conditions. 4. Preferred Stock Term Sheet: In cases where investors are seeking preferred stock in exchange for their investment, a preferred stock term sheet is used. This type of term sheet outlines the rights and preferences associated with preferred stock, such as liquidation preferences, dividends, and voting rights. 5. Investor-Specific Term Sheet: Investors, especially venture capital firms, may have their own unique term sheets that they prefer to use. These term sheets reflect specific preferences or requirements that the investor may have, such as specific rights or governance provisions. It is important for startups and investors in California to carefully review and negotiate the terms of the Gust Series Seed Term Sheet before proceeding to a more detailed legal agreement. The term sheet sets the tone for the investment relationship and serves as a framework for subsequent legal documentation, such as investment agreements and shareholder agreements.
