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    Term Sheet Case Study Assignment

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    Elena Ruzo
    The local tech startup is considering term sheet offers from two venture capital firms, Flyers and Rudy's, to raise $4 million for national expansion. The summary must compare the key terms of each offer, calculate founder payouts under different exit scenarios, and recommend which offer the startup should accept.

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    Term Sheet Case Study Assignment

    Uploaded by

    Elena Ruzo
    24 views2 pages
    The local tech startup is considering term sheet offers from two venture capital firms, Flyers and Rudy's, to raise $4 million for national expansion. The summary must compare the key terms of each offer, calculate founder payouts under different exit scenarios, and recommend which offer the startup should accept.

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    The local tech startup is considering term sheet offers from two venture capital firms, Flyers and Rudy's, to raise $4 million for national expansion. The summary must compare the key terms of each offer, calculate founder payouts under different exit scenarios, and recommend which offer the startup should accept.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views2 pages

    Term Sheet Case Study Assignment

    Uploaded by

    Elena Ruzo
    The local tech startup is considering term sheet offers from two venture capital firms, Flyers and Rudy's, to raise $4 million for national expansion. The summary must compare the key terms of each offer, calculate founder payouts under different exit scenarios, and recommend which offer the startup should accept.

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    © All Rights Reserved
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    Term Sheet Case Study Assignment – MGT 319/321

    Name:
    A local tech startup has quickly made a name for itself in the local Dayton region for its
    unique cyber security products. To expand nationally, it needs at least $4 million dollars
    over the next few years and will probably need additional financing in about three or four
    years from now. The startup made a deal with a local Angel investment group (Dayton
    Angels term sheet) for $300,000 via a convertible note a year ago (will convert upon making
    any deal with a VC). The startup is lucky enough to have garnered interest from two
    Dayton area venture capital firms (Rudy’s and Flyers term sheets).
    1. Complete the capitalization table under each VC investment scenario:
    Flyer VC Deal
    Shareholder Common Option Pool Series A Total Shares Total
    Shares Ownership
    Founders X X

    Dayton 66,667 X 300,000


    Angels
    Future X X
    Employees
    Flyer VC X X

    Total 2,450,000 100%

    Rudy VC Deal
    Shareholder Common Option Pool Series A Total Shares Total
    Shares Ownership
    Founders X X

    Dayton 96,000 X 300,000


    Angels
    Future X X
    Employees
    Rudy VC X X

    Dayton VC X X

    Total 3,900,000 100%


    2. Complete the side by side comparison table of the two investment options and indicate which
    option is most preferable to the founders in terms of:

    Item Flyers Rudy/Dayton Preference


    PreMoney Valuation
    Investment Amount
    Option Pool
    Founder Ownership %
    Liquidation Preference
    Participation
    Anti-Dilution
    Board Structure

    3. Which investment option is better for the founders if the company gets to an IPO? Explain why.

    4. How much do the founders get if they go with Flyer and have an exit value of $3.5Million?
    What about an exit value at $10Million? (disregard any dividends owed)

    5. How much do the founders get if they go with Rudy/Dayton and have an exit value of
    $6Million? What about at $20Million? What about at $40Million (disregard any dividends
    owed)

    6. How would the company fare under each term sheet if it runs into trouble (missing sales
    targets, running out of money, needing to raise again)?

    7. With only a few days before the term sheets expire, what should they do?

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