I have received four term sheets in the last ten years (three of them were for one startup).  Those term sheets were the result of more than a hundred meetings with various investors.  The process of getting a term sheet is a lot like getting a bid for a fraternity in college.  When I was at the University of Texas I visited three different fraternities Sigma Chi, Fiji and SigEp.  I was a Sigma Chi legacy so they didn’t bother to ask me if I wanted a bid, they just gave me one.  But SigEp and Fiji wanted to make sure I would accept a bid before they offered one.  The last thing they wanted to do was offer a bid and have it rejected.  Once I told Fiji I was going to accept a bid from SigEp they decided not to offer me a bid.  Most venture capitalists won’t give you a term sheet until you basically agree to accept it.  Why is this the case?  They don’t want anyone to be able to shop their deal.  What’s the point?  What if you could see term sheets offered by various venture capital firms to companies similarly situated to your startup?  Would this give you leverage?  Well Adeo Ressi wants to help you get some leverage.

Adeo’s site, The Funded is building a database of VC term sheets provided by members.  Mike Arrington explains why this is such a big deal:

Venture capitalists have a lot of leverage negotiating terms that help them increase ROI simply because they have a firm grasp of the market. Things like liquidity preference (how much money they get out before the founders in a sale), veto rights and other preferred stock privileges can affect the long term economics of a deal substantially. Entrepreneurs generally rely on their attorney and contacts to help them understand the current trends in terms. Now, though, TheFunded will help them by supplying even more information. Entrepreneurs will love this. VCs, not so much.


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