Our seed stage term sheet

Published on
April 25, 2017
min read
Written by

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.

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 very 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! 🚀

AirTree Ventures entities listed below are corporate authorised representatives (CAR) of Boutique Capital Pty Ltd (BCPL) AFSL 508011.

CAR has taken all reasonable care in producing all the information contained in the website including but not limited to reports, tables, maps, diagrams and photographs.

However, CAR will not be responsible for loss or damage arising from the use of this information. The contents of this website should not be used as a substitute for detailed investigations or analysis on any issues or questions the reader wishes to have answered.

You may download the information for your own personal use or to inform others about our materials, but you may not reproduce or modify it without our express permission.

To the extent to which this website contains advice it is general advice only and has been prepared by the Company for individuals identified as wholesale investors for the purposes of providing a financial product or financial service, under Section 761G or Section 761GA of the Corporations Act 2001 (Cth).

The information in this website is not intended to be relied upon as advice to investors or potential investors and has been prepared without taking into account personal investment objectives, financial circumstances or particular needs. Recipients of this information are advised to consult their own professional advisers about legal, tax, financial or other matters relevant to the suitability of this information.

Any investment(s) summarised in this website is subject to known and unknown risks, some of which are beyond the control of CAR and their directors, employees, advisers or agents. CAR does not guarantee any particular rate of return or the performance, nor does CAR and its directors personally guarantee the repayment of capital or any particular tax treatment. Past performance is not indicative of future performance.

All investments carry some level of risk, and there is typically a direct relationship between risk and return. We describe what steps we take to mitigate risk (where possible) in the investment documentation, which must be read prior to investing. It is important to note risk cannot be mitigated completely.

Whilst the contents of this website is based on information from sources which CAR considers reliable, its accuracy and completeness cannot be guaranteed. Data is not necessarily audited or independently verified. Any opinions reflect CAR’s judgment at this date and are subject to change. CAR has no obligation to provide revised assessments in the event of changed circumstances. To the extent permitted by law, BCPL, CAR and their directors and employees do not accept any liability for the results of any actions taken or not taken on the basis of information in this website, or for any negligent misstatements, errors or omissions.

AirTree Ventures 2021 Trustco Pty Ltd ACN 652 901 409 CAR Number 1293641, AirTree Ventures Opportunity Fund 2019 Trustco Pty Ltd ACN 633 454 467 CAR Number 1293645, AirTree Ventures Opportunity Fund 2021 Trustco Pty Ltd ACN 652 901 043 CAR Number 1293642, AirTree Ventures Opportunity Fund Trustco Pty Limited ACN 609 594 881 CAR Number 1293643.