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.
Annotated with detailed notes to help you understand each aspect of the Term Sheet."
Illinois Gust Series Seed Term Sheet is a legal document that outlines the terms and conditions of an investment agreement between a start-up company and investors in the state of Illinois. This term sheet provides detailed information about the investment structure, funding amount, and rights and obligations of both parties involved. The Illinois Gust Series Seed Term Sheet usually includes various key terms and provisions such as: 1. Investment Structure: This section describes the type of investment being made, whether it is equity financing, convertible debt, or another form of investment. 2. Valuation: The term sheet outlines the agreed-upon valuation of the start-up, which determines the ownership stake the investors will receive in exchange for their funding. 3. Funding Amount: It specifies the total amount of funding being invested in the start-up and may detail if it will be provided in a single lump sum or in multiple tranches. 4. Ownership and Dilution: This section explains the percentage ownership of the start-up that the investors will have post-investment, as well as any potential dilution that may occur in subsequent funding rounds. 5. Liquidation Preference: It outlines the order of priority for distributing proceeds in the event of a liquidation or exit, ensuring that the investors have a preferred return on their investment before other stakeholders. 6. Conversion Rights: In the case of convertible debt financing, this clause defines the terms under which the debt will convert to equity, including the conversion price and any applicable conversion discounts or caps. 7. Board Representation: The term sheet may specify whether the investors will have the right to appoint a representative to the start-up's board of directors, typically to safeguard their investment interests. 8. Anti-Dilution Protection: This provision protects investors from future down-round financing, ensuring that if the start-up raises capital at a lower valuation, the investors' ownership percentage is adjusted accordingly. 9. Founder Vesting: It outlines the terms and conditions under which the founders' shares will vest over time, ensuring their commitment and alignment with the investors' interests. 10. Governing Law: This clause designates Illinois law as the governing law for any disputes arising from the agreement. While there may not be different types of Illinois Gust Series Seed Term Sheets per se, the specific terms and conditions can vary depending on the negotiation between the start-up and investors. Each term sheet is tailored to the unique characteristics and needs of the particular investment agreement.
