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 Wisconsin Gust Series Seed Term Sheet is a comprehensive agreement used in seed financing transactions in the state of Wisconsin. It outlines the key terms and conditions governing the investment deal between a startup company and its investors. This term sheet serves as the basis for negotiating and finalizing the investment terms before proceeding with the actual funding. Key elements covered in the Wisconsin Gust Series Seed Term Sheet include: 1. Valuation: The term sheet specifies the pre-money valuation of the startup, which determines the percentage of ownership the investors will receive in exchange for their investment. 2. Investment Amount: It details the total investment amount committed by the investors, specifying how much capital the startup will receive. 3. Security Type: The term sheet identifies the type of securities to be issued to the investors. This commonly includes convertible notes or preferred stock. 4. Conversion Terms: If convertible notes are used, the term sheet outlines the conversion mechanics and any conversion discounts or price caps. 5. Liquidation Preference: It defines the order of payments in case of liquidation or acquisition, ensuring the investors receive priority over common shareholders in recovering their investment. 6. Board Representation: The term sheet stipulates the number of board seats the investors will have and any rights or observer rights associated with their board representation. 7. Voting Rights: It specifies the voting rights of different classes of shareholders and any special approval thresholds for certain decisions. 8. Anti-Dilution Protection: The term sheet may include anti-dilution provisions to protect investors in case of subsequent financing rounds at a lower valuation. 9. Vesting of Founder Shares: If applicable, the term sheet outlines the vesting schedule for the founders' shares, ensuring continued commitment and alignment of interests. 10. Intellectual Property: It may include provisions ensuring proper assignment and protection of the startup's intellectual property. Different types of Wisconsin Gust Series Seed Term Sheets may exist depending on specific variations required by individual investors or startups. These may include variations in valuation models, investor rights, or additional provisions tailored to the unique needs of the parties involved.
