扒哥吃瓜

PREPARING FOR INVESTMENT听

TERM SHEET KEY POINTS & TERM SHEET GUARDRAILS听

A Share Purchase Agreement (SPA) term sheet outlines the key terms that will govern an investment transaction. A summary of the principal commercial and legal terms along with typical approaches seen in early-stage investments is outlined below. This includes:听

• Board composition & structure听听听

• Leaver and vesting provisions听听听

• Investor consents听听听

• 痴补濒耻补迟颈辞苍听听听

• 厂迟谤耻肠迟耻谤别听听听

• 翱辫迟颈辞苍听辫辞辞濒听听听

• 贵别别蝉听听听

Each transaction is different. Businesses should听seek听experienced and specific professional and legal advice tailored to their requirements.听

1. Board composition & structure听

The board composition defines how control and oversight are shared between founders and investors following transaction completion. In your term sheet you should consider the number of directors, who appoints them and how decisions are made. This is to ensure balanced governance, allowing investors oversight while preserving founders鈥� ability to manage the business day-to-day.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Founder-led boards are common at seed stage, with one or more founders听retaining听control.听听听

• Investor representation increases as capital invested and risk rise, typically through one investor director. This may include a minimum shareholding听required听to have an investor board seat.听听听

• Independent directors may be introduced to bring neutrality and experience.听听听

The market norm would see a board听comprising听of founders,听investors听and an independent director.听

2. Leaver and vesting provisions听

Leaver and vesting provisions protect the company and investors from a founder or key employee leaving prematurely. They define how much equity a departing individual can听retain听and under what circumstances. This ensures alignment between founder commitment and company performance.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• The % of founder shares given on day one and the period over which they are vested. The standard is 0% shares given on day one with the rest vesting over a 4-year period.听听听

• Good leavers (e.g. those leaving due to illness or company sale) usually听retain听vested shares.听听听

• Bad leavers (e.g. voluntary resignation or dismissal for cause) are typically听required听to sell their shares back at nominal value.听听听

There are many ways that these provisions can be structured, and听it鈥檚听recommended to seek legal advice however, it is standard is to include at least a definition of good and bad leaver, with good leaver including scenarios such as death,听incapacity听or serious illness.听

3. Investor Consents听

Investor consents, often referred to as 鈥渞eserved matters鈥�,听specify which company decisions require prior investor approval. These provisions protect investors from material changes that could affect their investment without restricting day-to-day management.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Approval is听required听for issuing new shares or changing share rights.听听听

• Consent is needed for significant borrowing, asset sales, or amending constitutional documents.听听听

• Some decisions may require the consent of a 鈥渕ajor investor鈥� or听a majority of听investors.听听听

The market norm would see a reserved matters list agreed between the founders and majority investors.听

4. Valuation听

Valuation听establishes听the company鈥檚 worth for investment purposes and听determines听how much equity is exchanged. It provides a transparent basis for negotiation and future growth expectations.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Pre-money valuation听represents听the company鈥檚 value before new capital is invested.听听听

• Post-money valuation includes the capital raised in the current round.听听听

• Negotiations often reference comparable market transactions or听anticipated听growth.听

5. Structure听

The structure sets out how the investment is executed, specifying whether investors听acquire听existing shares, subscribe for new ones, or a combination of both. It clarifies the flow of funds and ownership post-transaction.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Investment is made in ordinary or preference shares (participating and non-participating).听听听

• Preference shares听generally rank听above ordinary shares because they grant holders priority in receiving dividends and repayment of capital if the company is wound up. Ordinary shares are then paid out proportionately from any remaining value.听听听

• Non-participating preference gives investors the option to receive their听initial听investment back (usually 1x) or share in proceeds with other shareholders.听听听

• Participating preference allows investors to receive their听initial听amount and a further pro rata share of remaining proceeds.听听听

Standard seen is a non-participating preference share structure, with a 1.0x liquidation multiple.听

6.听Option听Pool听

An option pool reserves a听portion听of the company鈥檚 equity for current and future employees. It incentivises key hires and aligns employee interests with company performance.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Pools can be created pre-money (diluting existing shareholders) or post-money (diluting both founders and investors).听听听

• The pool size is usually reviewed at each funding round.听听听

Typically, a 10% post-money option pool is听established.听

7. Fees听

Fee provisions听allocate听responsibility for the professional and transaction costs incurred as part of the investment. These clauses provide transparency and prevent post-completion disputes.听

罢测辫颈肠补濒听补辫辫谤辞补肠丑别蝉:听

• Investors often听request听that the company covers a capped amount of their legal costs.听听听

• The company pays its own legal,听financial听and advisory fees, often funded from the investment proceeds.听听听

The standard is that each party pays their own costs.

This information is a non-exhaustive summary of some of the factors which may be relevant to seeking investment in the space sector. Persons should take independent legal and professional advice before seeking any such investment.