Angel Term Sheet Evolution - Part 2 - Dan Rosen - The Rosen Light Pref Angel Term Sheet

Bellingham Angel Group Education Breakfast November 17, 2009 - Basil Peters and Dan Rosen

Highlights of Angel Term Sheet Evolution- Part 2:

Angels used to be lazy. VCs and the Golden Rule	How the Light Pref term sheet protects both sides	Valuations today - pre-revenue $1 to 3 million
The balance between protection and being 'friendly'	Keeping the company agile	Why a 1X pref is most fair to the investors and entrepreneurs
That worked well when everything was going up	Common stock - where it works and where it doesn't	Differences between non-participating and participating prefs
Getting hammered by the VCs	Why Dan doesn't recommend common very often	Why angels prefer participating preferreds
Angels have become very valuation sensitive	Everything flows from the valuation	The dangers if VCs follow on with participating prefs
How the Alliance of Angels became known as better negotiators	Don't be afraid to walk away from a bad term sheet	Liquidation 'overhang' and 'caps'
How the lawyers 'helped'	"Excel is your friend" when determining valuation	Trading off protections and participating prefs
Convertible notes that were profoundly unfair	Helping entrepreneurs get in touch with reality	Anti-dilution and why it doesn't usually make sense
Angels used to be 'all over the map' and much less sophisticated	Fixing the cap table is sometimes too much work	Discounts and warrants only make sense if there was a problem
Lead investors and why it's so important to find one	Angels should never 'punt the problem'	Why Dan prefers non-cumulative dividends
Why lawyers recommend convertible notes (its the fees)	Everyone needs to understand the option pool impact	Why drag alongs should apply to all decisions
What lawyers charge for a typical term sheet	The pre-deal cap table - one lead negotiator	The Rosen Light Pref download and comments available here

Download the Rosen Light Preferred Term Sheet here.

Part 3 of this video includes some very value questions and answers from the Bellingham Angels.

Part 3 of this video is the beginning of the Q and A.

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