Employment Term Sheet: Fill & Download for Free

Yes. After learning hard lessons about the tension between investors and founders, I teamed up with my former business partner, Dan Flanegan, and my attorney, K. Adam Bloom, to create an open-source standard that you can attach to any bylaw agreement, term sheet, employment agreement, etc.It’s called the Founder Friendly Standard. It has 17 sections that can lay common disputes to rest such as who gets to vote, who gets liquidation preferences, what is the scope of non-compete, etc.Here are (3) three of the juiciest sections:1.1 Individuals who work for the company and are instrumental in its inception (“Founders”) receive a class of equity such as Common Stock which provides no less than twenty-four (24) votes to one (1) vote of stock held by investors or employees.If you’re the founder, why not control your own company? This can lead to better business performance for investors according to Credit Suisse’s Family 1000 research[1][1][1][1].2.1 Founders agree in writing they will give and receive performance reviews at the end of each fiscal quarter for the first four (4) years.Have you ever seen conflict fester and erupt? Famous examples include Bill Gates & Paul Allen, Evan Spiegel & Bobby Murphy, and Mark Zuckerberg & Eduardo Saverin. This provision facilitates giving and receiving feedback at least every quarter to address conflict before it becomes a risk to your startup.3.2 For at least the first two (2) years of operations, the company does not agree to binding arbitration with any investor.It’s a known fact that forced arbitration between parties of unequal bargaining power[2][2][2][2] is unfair. And since arbitration is often more expensive than regular court, wouldn’t it be in the investor’s best interest to go along here to save costs?The full text of Founder Friendly Standard is available here. I encourage you to read it and send it to your attorney for your next conversation. See the “Quick Links” menu at the top of the standard. If you are papering a deal, your attorney can download and customize our free template term sheet. If an investor sent you paperwork, your attorney can compare it to the Founder Friendly Standard with our free attorney review form. You can download these resources without even providing your email address.Our attorney review form helps you organize analysis of the legal issues that can determine whether you run your startup or take orders from investors. We used the same review form as a starting point for the below infographic which compares popular term sheets to Founder Friendly Standard.Founder Friendly Standard v. other term sheets [Infographic]Click for an interactive infographic comparison of Founder Friendly Standard to term sheet templates like the Y Combinator Safe, 500 Startups KISS, NVCA Model Legal Docs, etc. In the interactive version, you can click on individual bars to reveal attorney commentary about each issue.What’s in it for investors?Healthy financial returns. I’ve researched how the Founder Friendly Standard combined with optionality can deliver better returns than today’s angel investing and venture capital methods. The book is called: Grays Sports Almanac for Venture Capital: A new standard for optionality to beat the odds.Footnotes[1] https://www.credit-suisse.com/media/assets/corporate/docs/publications/research-institute/the-cs-family-1000-in-2018-en.pdf[1] https://www.credit-suisse.com/media/assets/corporate/docs/publications/research-institute/the-cs-family-1000-in-2018-en.pdf[1] https://www.credit-suisse.com/media/assets/corporate/docs/publications/research-institute/the-cs-family-1000-in-2018-en.pdf[1] https://www.credit-suisse.com/media/assets/corporate/docs/publications/research-institute/the-cs-family-1000-in-2018-en.pdf[2] unequal+bargaining+power+arbitration+unfair - Google Search[2] unequal+bargaining+power+arbitration+unfair - Google Search[2] unequal+bargaining+power+arbitration+unfair - Google Search[2] unequal+bargaining+power+arbitration+unfair - Google Search

A company thinking about raising its first round of financing should get its legal ducks in a row before accepting term sheets; fundraising is time-consuming and the Company should focus its efforts on investor meetings and not clean-up items. Things generally move pretty quickly after a term sheet is signed, so, to speed up the time between signing a term sheet and closing, the Company should have all diligence items ready before fundraising.Once a term sheet is finalized and signed, the investor will send the company a due diligence request list. There are several items an investor will request in connection with its diligence review, including documentation relating to:Capitalization;Intellectual property;Commercial agreements;Securities filings; andCorporate governance.As such, the company should ensure it has the following items ready to provide to investors once the term sheet is signed:Option and common stock grant documentation for each person/entity on the Company’s stockholders’ ledger;Confidential Information and Inventions Assignment Agreements for each founder/consultant/employee/advisor and NDAs;Proof that the founders, and any other person with stock subject to vesting, has filed an 83(b) election with the IRS;All consents and minutes of the Board and stockholders;Copies of the Company’s equity incentive plan and related documentsAny material vendor or customer agreements;Copies of all securities filings;Office lease(s);Corporate documents, such as the Company’s certificate of incorporation, bylaws, foreign qualifications, and DBAs; andFinancial statements.Additionally, the company will want to make sure any funds the founders have loaned to the company are properly documented and approved, and key employees have entered into employment agreements or offer letters. Of course, the company will also want to make sure it has a company bank account and is not using a personal bank account. To hear more advice on your first equity fundraise, read this blog by Justin Kan, Atrium’s CEO.All content presented herein is for informational purposes only. Nothing should be construed as legal advice. Transmission and receipt of this information is not intended to create and does not constitute, an attorney-client relationship with Atrium LLP. There is no expectation of attorney-client privilege or confidentiality of anything you may communicate to us in this forum. Do not act upon any information presented without seeking professional counsel.

Normal:Tag/dragpro rata ROFRliquidation preferencereverse vesting on founder shares if not already in placeboard compositionSometimes:Anti-dilutionFounder employment terms