Term Sheets and Valuation : March 3, 2015

Term Sheets and Valuation: ENET meeting, March 3, 2015

Tomorrow evening, Tuesday March 3, 2015 at 7pm, The Boston Entrepreneurs’ Network (ENET) will present a panel on this subject for at the group’s Waltham location: Constant Contact, 1601 Trepalo Rd., 1st Floor, Innoloft, Waltham, Massachusetts (Exit 28, I-95/Route 128).

 

Come listen to our panel of founders and executives talk about their experiences negotiating a term sheet with investors and/or strategic partners and how they established a valuation for their company. Learn about what terms impact founders’ managerial control of investments and operating decisions. What value does your company contribute to a potential investor’s portfolio? These and other exciting questions will be addressed by our speakers using real examples. For your individual concerns, a networking session will precede the meeting and a question and answer session will follow the panelists’ presentations.

Speakers include:

  • Jules Fried, principal in Fried, Bahl & Associates, a growth advisory firm specializing in emerging and middle market companies.   He is a serial entrepreneur, attorney, venture mentor, and angel investor. He founded a two time Inc. 500 company that grew to $47 million in revenue, is co-founder and director of First Commons Bank, one of the fastest growing banks in the country, and started a health care law firm that was eventually merged into a major national firm.
  • Thomas Farb, Founder and President, Estabrook Ventures, LLC, http://estabrookventures.com, providing interim management services, business plan development and angel investments to numerous medical and technology companies. Currently, Mr. Farb is a Co-Founder and part-time CFO and Advisor to Brahman Industries, LLC, developer of the STATIM (“Storm, Tornado And Tsunami Interconnected Module”) Shelter System, an innovative & life saving modular concrete, floating shelter that will have significant global & social impact and save lives where previously not possible, particularly in a tsunami or other disasters. In 2012 through 2013, Mr. Farb was Co-Founder, EVP of Corporate Development & CFO of Atherio, a global IT Services & web/mobile development company with headquarters in Florida and offices in the U.S., London and India.
  • Mr. Tom Kinneman, MBA, Vice President & COO of North Shore InnoVentures, http://nsiv.org. and also President of the North Shore Technology Council. Formerly, he was President of the Image Polymers unit of Mitsui Chemicals, headquartered in Wilmington, MA. The company develops, manufactures, and markets resins used in toners for laser printers and copiers. Mr. Kinneman has a consistent record of new business growth and profit improvement in diverse American, European and Asian markets. He has strong strategic capabilities, broad general management background, and proven leadership with multi-functional, global teams.

Dr. Roger Frecette is the meeting moderator.   He is Co-Founder and Principal of New England PharmAssociates, a consultancy offering on-demand executive and business advisory services to life sciences enterprises. He is also the US East Coast Ambassador for Medicon Valley Alliance, a life sciences cluster organization based in Copenhagen. Previously, he was a Co-Founder of Frontiera Therapeutics, a startup developing therapeutics for vascular leak.

Though I am not speaker or moderator for this presentation, I was speaker on this topic for TiE Boston (The Indus Entrepreneurs), at a presentation also in Waltham, Massachusetts.

My earlier presentation also covered both term sheets and related topics that I thought my be of interest to those interested in this topic and might be a good supplement to the presentation tomorrow night.

My precise topic was Preparing your Company for Investment – Angel & VC Term Sheet Negotiations – Post-Deal Relations”.

For much of the presentation, I discussed how, in order to gain investment, a company must first put its house in order including legal due diligence in the following areas:

  • Business entity, capital and debt structure,
  • Management team, employee relations and incentives,
  • Commercial contracts, including any licensing agreements
  • Patents, trademarks and other intellectual property issues
  • Assets, liabilities and any regulatory issues.

 

I then discussed negotiating with angels and VCs, the term sheet and key financial and control terms, and then the documentation through to the closing the financing transaction. That discussion included discussion and analysis of such key financing deal terms as

 

  • Liquidation Preferences
  • “Participating Preferred”
  • Cumulate Dividends
  • Weighted Average and Full Ratchet Anti-Dilution
  • “Play or Lose”
  • Pre-emptive rights
  • “Put” Rights
  • Drag-Along /Tag-Along Rights
  • Re-Vesting Founders Stock

 

I concluded with a discussion of the post-funding relationship between company management and investors.

 

For presentation outline, see LINK: http://www.engelschultz.com/index.php/preparing-your-company-for-investmentl-and-vc-term-sheet-negotiations/

 

For more information on, or to register for, this March 3, 2015 ENET event tomorrow night, go to http://www.boston-enet.org/meetings/term-sheets-and-valuation-0

 

Hopefully, this ENET panel as well as the information on my earlier TiE Boston presentation will be quite helpful to founders, entrepreneurs wand would-be entrepreneurs for the small and early stage companies I represent. Hope to see you at our new ENET meeting place, Constant Contact in Waltham, tomorrow night!

 

*     *     *

 

I remain active in ENET, a mainly Waltham-based group that aids entrepreneurs, small and early stage companies, and people who invest or work in those companies. I have been on the ENET Board for the last twelve years, and the past five years since 2009 served as ENET’s Chairman. In May 2013, I was elected by ENET members to my 3rd two-year term as Chairman.

 

On September 2, 2014, I moderated a panel on this subject for The Boston Entrepreneurs’ Network (ENET) in Waltham, MA on “Entrepreneur Success Stories”, and can now provide links to three separate videos of the presentations that evening.

 

We had three excellent speakers for that evening, all serial entrepreneurs with successful exits in the consumer, high tech and life sciences fields. One of our three entrepreneur speakers has authored a well-known book on entrepreneurship, one is also a senior lecturer on entrepreneurship at Harvard Business School and one also works as a principal and investor in a major Boston venture capital firm. Below is more information on each video and the speakers.

 

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  • ENET Video #1 (High Tech):   Achieving success over the long term as a high tech startup via bootstrapping, funding and successful exit.

 

Author of “The Tech Entrepreneur’s Survival Guide: How to Bootstrap Your Startup, Lead Through Tough Times, and Cash In for Success” , high tech entrepreneur, Bernd Schoner speaks about his company’s long term success and recognizing small successes along the way, over more than 10 years in building a product and work force, bootstrapping , then attracting venture capital and then a successful exit.

LINK:   http://youtu.be/mBBQ3hAnPRI   (17 minutes)

 

  • ENET Video #2 (Consumer):   Serial Entrepreneur speaks about achieving the right culture for financial and personal success in startups led by Women CEOs

 

A consumer products entrepreneur on her third startup, Janet Kraus is mother of twins and currently CEO of Peach, a new product and sales concept women’s lingerie that she hopes in time will overtake Victoria’s Secret, with emphasis on women consumers over age 30. Janet has had two successful exits, one a huge exit and the other more sideways but still all money back to investors. She will talk about team and culture and building a nurturing environment, some of the distinctions seen a female founded and run company, and how entrepreneurship is part of her DNA. Janet is also a senior lecturer in entrepreneurship at Harvard Business School.

LINK:

http://www.youtube.com/watch?v=w_pSimCgHKg&feature=youtu.be (16 minutes)

 

  • ENET Video #3 (Life Sciences):       Scientist, Inventor, VC and Serial entrepreneur (all in one person!) speaks on “building the concerto” – all the key pieces you need to fit together to build a successful life sciences startup

 

A serial life sciences entrepreneur and VC, Geoff von Maltzahn is both a principal at Flagship Venture Labs that funds and launches life sciences startups and also currently CEO of several life science startups. Geoff is also author of numerous patents. How does he do it all? Effortlessly and with elegance. As you will hear on our ENET video, when Geoff talks about “building the concerto” with all the different pieces that need to be brought together for a successful life sciences startup company. He responds to questions from meeting co-organizer, scientist and ENET member Andy Synder.

LINK: http://www.youtube.com/watch?v=IP1bf9Fx6-A&feature=youtu.be (22 minutes)

 

For more information on the event and speaker bio’s for this Sept. 2, 2014 ENET Kickoff meeting, go to http://www.boston-enet.org/meetings/entrepreneur-success-stories-0 or www.boston-enet.org    My legal assistant John Papale2nd also served as a co-organizer for this September 2014 ENET meeting

 

Additionally, in prior years, I’ve moderated and/or spoken at a number of ENET panel presentations, including presentations on the following subjects:

  • “Raising Money from CrowdFunding , May 2014 (moderator),
  • Co-Founders and Core Team – finding them, protecting yourself, managing expectations”. February 2014 (moderator & speaker)
  • “Ready, Set, Launch. Knowing when you’re ready & How to start a company” , September 2013 (moderator),
  • Online Finance and Crowd Funding , April 2013 (moderator),
  • Bootstrapping 101: Alternative Ways to fund a Startup without an Angel or VC, November 2012 (moderator)
  • Seed and Angel Financing , October 2012 (moderator),
  • Getting Stuff for Free, April 2012 (moderator),
  • Transforming Your Idea into a Successful Company, September 2011 (speaker and moderator),
  • Get Going! Launching a Successful Business, September 2010 (moderator),
  • Licensing Technology, February 2010 (moderator),
  • How to Select and Retain Management for your Startup Company, February 8, 2008 (speaker and moderator)
  • Getting Initial Money to go from Nothing to Something, October 2007 (speaker and moderator)
  • Strategic Alliances and Partnerships: to build, finance, and develop early stage companies, November 2006 (speaker and moderator)
  • Building Boards of Advisors and Boards of Directors, March 2006 (moderator)
  • Protecting Your Intellectual Property, January 2006 (speaker)

 

For each of the above presentations, my slides and those of the other speakers on my panel are also available at the ENET web site at this link – http://www.boston-enet.org/meetings/meeting-archives .   I hope this information is helpful to you in your business. Again, if you would like more information on our group, go to www.boston-enet.org

 

For both the September 2013 and February 2014 meetings, I was aided by my son,. William Adelson1st  as co-organizer. William recruited 2 of the 4 speakers on September 3. During his service with ENET, William also worked as Social Media Co-Manager and was elected to the ENET Ad Board. He is a Second Lt. in the Massachusetts National Guard, and now on leave from ENET, as he left in late February 2014 to attend the U.S. Army flight school in Ft. Rucker, AL. William’s training is to be an Army helicopter pilot, a 16-month training program. William has been flying small Army helicopters, and recently graduated to the stage of learning to fly Blackhawk helicopters. He expect to graduate the program in July 2015 when he will return to Massachusetts and the civilian sector, even as he continues his service in the Massachusetts National Guard.

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