Templates and tips for first-time founders and investors

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02.06.2021
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As encouraging as the rapid development of the Swiss start-up scene is, it also means that only few founders and investors are experienced. This leads to uncertainty, inefficiency and, here and there, to bad decisions. Publications such as the recently published term sheet template for pre-seed and seed rounds by Wingman Ventures provide a remedy.

There are many decisions made in the course of financing rounds. They concern the actual financing but also, for example, participation and information rights. This constitutes a challenge for first time founders. It takes a while before entrepreneurs are familiar with talking to investors and understand the implications for the founders of the mechanism behind some clauses. This leads to cumbersome and complicated negotiations.

Furthermore, Swiss founders compete in European tech and for funding from the largest European investors on their way to build leading companies. Hence, it is important to have plain vanilla terms everybody considers customary and avoid clauses such as milestones approaches or complex liquidation preferences in the first financing rounds. While some clauses can be harmful to the founders, other clauses cause simply too much complexity at an early stage of the company, where the highest risk is that the business fails. 

Wingman Ventures decided to address these issues by sharing its founder-friendly term sheet publicly. The intention of this template is to help streamline the development of early-stage investing through the use of standardised and consistent set of pre-seed and seed financing clauses. Also, the published terms shall take the anxiety some founders might have of the process with a VC. The template can be downloaded here.

In addition to the new template from Wingman Ventures, there are other publications that address the same problem. Somewhat longer ago, the investor association Seca developed two sample documents for financing rounds:

  • one for start-up investments in Switzerland by business angels and similar start-up investors in the range of CHF 0.5 – 5 Mio. (“Model Documentation light”) and
  • one for seizable venture capital investments by institutional/international investors in the range of CHF 5 – 20 Mio. (“Model Documentation large”).

Each model documentation comprising clean and annotated/commented versions of a term sheet, an investment agreement, a shareholders agreement, articles of association and board regulations can be down-loaded below for free.

The Startup Guide by Kellerhals Carrard entitled "Startup from Incorporation to Exit" covers the topic even more comprehensively. The Guide aims to describe, in a simple, precise and practical way, the legal framework marking all stages of the company's life. It can also be downloaded for free.

In addition, the Swiss Startup Association has published several texts on legal topics on its website, such as term sheets or shareholder agreements.

(Stefan Kyora)

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