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.
The Michigan Gust Series Seed Term Sheet is a comprehensive document that outlines the terms and conditions for seed investment funding in the state of Michigan. This term sheet serves as a framework for entrepreneurs and investors to negotiate and finalize their agreements. It plays a fundamental role in shaping the investment agreements and sets the foundation for the relationship between the startup and the investor. Some key elements covered in the Michigan Gust Series Seed Term Sheet include: 1. Funding Amount: The term sheet specifies the initial investment amount that the investor is willing to provide to the startup. This amount is typically based on the startup's current valuation and funding requirements. 2. Valuation: The term sheet discusses the pre-money valuation of the startup, which directly impacts the ownership stake the investor will receive in exchange for their investment. The valuation is determined through negotiations between the startup and the investor. 3. Equity Structure: This section outlines the equity structure of the company, including the class of stock being issued and any special rights or preferences associated with it. It may include provisions for liquidation preferences, anti-dilution protection, and voting rights. 4. Participation: The term sheet may describe whether the investor will have a say in certain significant company decisions, such as board representation or observer rights. 5. Milestones and Vesting: It is common for the term sheet to include specific milestones that the startup must achieve to secure subsequent tranches of funding. Additionally, it may discuss vesting requirements for founders and key employees to align their interests with the long-term success of the company. 6. Governing Law and Dispute Resolution: This section defines the jurisdiction and court system that will govern any legal disputes that may arise between the parties. The Michigan Gust Series Seed Term Sheet may also have different variations or versions, depending on the specific preferences and investment strategies of the investors involved. Different types or categories may include: 1. Standard Series Seed Term Sheet: This is the most common type, encompassing the essential terms found in typical seed investment deals. 2. Modified Series Seed Term Sheet: This version may include additional or unique terms that are tailored to the preferences of the investor(s) or startup involved. These modifications can cover various aspects, such as specific protective provisions or unique milestone requirements. 3. Accelerator Program Term Sheet: This variation is designed for startups that are part of an accelerator program, often including additional provisions related to the terms of participation in the program and the associated benefits. In conclusion, the Michigan Gust Series Seed Term Sheet is a critical document that outlines the terms and conditions of seed investments in Michigan. It provides a solid foundation for negotiations between startups and investors, ensuring a transparent and structured investment process.
