Understanding Angel and Venture Term Sheets:

William Perkins, Partner Siena Colegrave, Associate

April 17, 2014

A Play in Three Acts

CAST & SETTING

CAST Entrepreneur..................................................................Siena Colegrave

Siena, an engineer by training, spent many years in the labs of a large technology company. She is now leading a group of her former work colleagues into a new tech start-up. Having spotted the growing interest in electric cars, Siena and her team have developed a product that sits between the power source (i.e., wall plug) and the car charging port that speeds charge times by 30%-50% (in early lab tests of a crude prototype). SpeedyCharge needs $500-750,000 to develop a beta version of the product and place it with a local electric car club who have signed on to beta test it.

Angel Investor........................................................................ Will Perkins

Will, a lawyer by training, now spends his time investing in early-stage growth companies as an angel and, together with his group of old friends, functions almost as an angel fund.

SETTING Having been introduced through a mutual connection, Siena and Will are meeting in person for the first time at a local craft beer hall to discuss and negotiate terms for an angel investment round led by Will. Prior to this meeting, Siena and Will had a long “meeting” via teleconference where Siena walked Will through SpeedyCharge’s pitch deck and his business model. Will showed a willingness to invest, but Will wanted to meet in person to negotiate terms.

ACT I Will and Julio meet at The Beer Hall and jump right into their negotiation. Things quickly turn to valuation...

Key Terms •  LLC ❒ •  Corporation ❒ •  Founders ❒ •  Valuation ❒ •  Cap table ❒ •  Pre-money ❒ •  Post-money ❒ •  Convertible notes ❒ •  Preferred stock ❒ •  Priced round ❒ •  Conversion cap ❒

ACT II With valuation and structure settled, Will and Julio turn to other key terms and topics...

Key Terms •  Option Pool ❒ •  Vesting ❒ •  Pre-emptive rights ❒ •  Blocking rights ❒ •  Protective provisions ❒ •  Board seat ❒ •  Observer ❒

ACT III Things are wrapping up...

Key Terms •  Information rights ❒ •  Timing ❒ •  Drafting ❒ •  Counsel ❒ •  Expenses ❒

ACT IV

What didn’t come up...

Key Terms •  Dividends ❒ •  Participating ❒

preferred •  Anti-dilution ❒ •  Weighted-average ❒ •  Registration rights ❒ •  Full ratchet ❒ •  ROFR ❒ •  Co-sale ❒ •  Drag ❒

Other Resources •  The National Venture Capital Association’s “‘template’ set of model legal documents for

venture capital investments” are available at: http://www.nvca.org

•  Series Seed documents are designed to simply seed rounds and are almost “venture-lite” documents. They are available at:

http://www.seriesseed.com •  The model documents, while instructive and prepared with some helpful annotations, are

no substitute for a thorough discussion/translation by your own counsel

Bingham Offices

Why Bingham for Emerging Growth Companies? •  Recognized as having a National Tier 1 Venture Capital Practice

for 2014 by Best Lawyers/U.S News and World Report •  Regularly refer prospective investment opportunities to our venture

capital clients and contacts •  International funds experience •  Clients rely on us not only for legal advice but also for a

reasonable, practical approach •  Extensive corporate and operational experience •  We bring the “A Team” •  No “bait and switch” •  Focus on value added, cost-effective services

•  Bingham has extensive experience representing early stage companies in: •  Formation •  Financing •  Licensing and technology transfer •  Patent strategy and prosecution •  Commercial contracts •  Equity plans

•  We also represent venture capital funds in: •  Organizational matters •  Negotiating and documenting their investments in portfolio companies •  Representing clients in multiple rounds of preferred stock and other

financings •  Investing in “seed” stage, mid-stage and later-stage companies

Why Bingham for Emerging Growth Companies?

Representative Venture and Emerging Growth Company Clients

Representative Large Tech Clients

Will Perkins Will Perkins concentrates his practice on general corporate matters and licensing matters, with an emphasis on strategic investments, mergers and acquisitions, structuring and financing new ventures, and public and private offerings of securities, including representation of both financial and strategic buyers. He represents both public and private companies, as well as private equity funds, in a wide range of transactions including venture capital financings; in-licensing and out-licensing transactions; product manufacturing and distribution arrangements and initial public offerings and follow-on public offerings of equity and debt securities.

Siena Colegrave Siena Colegrave is developing her practice advising both public and private companies on a broad range of corporate matters, including structuring and financing new ventures, mergers and acquisitions for financial and strategic buyers, structuring and financing new ventures, equity offerings, securities law compliance, and corporate governance issues. Before joining Bingham, Siena worked at Linklaters, LLP in both London and Hong Kong, where she gained experience representing public and private companies in mergers and acquisitions, advising on general corporate matters, and advising on financial regulatory matters.

William S. Perkins Partner 617-951-8574 william.perkins@bingham.com

Thank You and

Call us! We genuinely love these topics and are always

happy to brainstorm and answer questions.

Siena Colegrave Associate 617-951-8217 siena.colegrave@bingham.com

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