AirTree Open Source Seed Stage Term Sheet
We’re big believers in anything that makes the murky world of VC more transparent. We also know that anything that saves founders time and money when raising is a win/win for everyone. That’s why we’ve decided to open source our standard form seed stage term sheet and publish it as a resource for founders. You can find it here.
This is the template we use for all our seed deals. It’s a plain vanilla, straight-up-the-fairway term sheet – with all the standard terms you would expect to see from Valley funds.
We’re hoping this is helpful to founders in a few different ways:
1) Vanilla terms. We want to standardise around a set of vanilla terms that make the most sense for seed stage founders. When we invest in your company, we want to make sure you’re set up well for future rounds – and this means making sure there’s nothing strange in the term sheet. We’ve all seen bad behaviour from investors, and there’s plenty of funky terms out there that have caused lots of harm to Aussie startups in the past. We’re talking about things like tranched investments, multiple liquidation preferences, ratchet provisions, super pro-rata rights etc. We think it’s important to do everything we can to eliminate these sorts of terms from the seed stage landscape in Australia. There may be a place for non-standard terms in later rounds – but a typical seed deal here should have the same vanilla terms you’d expect to see in the Valley.
2) Plain English (Hallelujah…). If you’re negotiating your first term sheet, there’s probably a bunch of stuff in there that you haven’t seen before. The language used in most VC term sheets is also bloody confusing. In some cases, founders don’t fully understand the terms they’re signing up for. This seems crazy to us – we want our founders to understand everything before we go into business together. To help, we’ve included some notes (in plain English) to explain each term.
3) Saving time & money. You’ve just raised a bunch of money – the last thing you want to do is spend 6 weeks negotiating docs and $50k on lawyers. More vanilla terms = faster close = less billable hours from the lawyers = more money & time to spend on the business.
We hope this is a useful resource for founders. We welcome thoughts/feedback: community [at] airtree [dot] vc.