Draft Term Sheet for Alliance of Angels

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Draft Term Sheet for Alliance of Angels
This draft term sheet, by Dan Rosen, CEO Dan Rosen & Associates, is for use by Alliance of Angels members as a starting point in negotiating seed stage deals. The AoA lead investor is noted as in the document. Each party in such deals should seek appropriate legal counsel. Except for the section titled “Exclusivity,” this term sheet does not create a legally binding obligation on any person or entity.

Company name

Acme, Inc

Location

Type of Entity

Washington State C Corporation

Type of Equity

Comment [DR1]: Some prefer Delaware incorporation. Washington state and Delaware have parallel laws, but Delaware has greater case law and therefore better protection for company
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Thereafter, all of the proceeds shall be ratably distributed to the holders of Preferred and
Common Stock, on an as converted basis.

Comment [DR8]: In the past, it was often argued that Angels should not request 1x participating preferred without a cap, because larger follow-on rounds would then get the same.
While a small angel round doesn’t change the
“liquidation overhang,” a large VC round might.
Capping the liquidation preference in future, larger rounds does make sense.

Dividends

Dividends only when declared, and not cumulative. The holders of
Series A Preferred will be entitled to receive dividends only when and if declared by the Board and in preference to holders of Common Stock.

Comment [DR10]: Cumulative dividends do make sense in the case of a redemption provision, as outlined below.

Voting Rights

Except as set forth in “Protective Provisions” below, the Series A Preferred shall vote together

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