CellFree - Background You are the founder of CellFree, a cellphone battery and charging unit that allows cellphones to charge wirelessly. CellFree has been in operation for 2 years. For the first year and a half you were able to self- fund your company with $50,000 which you had saved from working at your previous job. Six months ago, however, you realized that additional outside financing would be necessary to enable your company to keep growing at its current pace. To obtain this financing you went on AngelList, and secured an investment from South Philly Angels, a well-known local angel group, in the form of $300,000 in convertible notes. These notes carried a 10% annual interest rate, payable at maturity, and would be automatically converted into preferred stock at a 20% discount upon the raising of a Series A financing round. Over the course of the next 6-months you quickly used up these funds. Realizing that you would soon need new financing you went to work trying to drum up investments from the venture capital community. Within a few weeks, you received term sheets from two VC firms: TruCost Venture Partners and Robin Hood Ventures. TruCost Venture Partners is a well-known venture capital firm located in Silicon Valley. They're known for their past successful investments. They've recently raised their largest fund to date with $650M in committed capital. Robin Hood Ventures is a smaller, more recently established VC firm located in Philadelphia. They've raised $150M for their most recent fund and have had good success in their investments thus far. Together with your co-founders you need to review each VC's term sheet and decide which offer your firm will take. TruCost Venture Partners Term Sheet Summary THE OFFERING Investors: TruCost Venture Partners: 4,000,000 shares, $4,000,000 Amount raised: $4,000,000 Price per share: $1 per share (Original purchase price) Pre-money valuation: $5,000,000 Employee pool: 25% of the fully diluted post-money capitalization (taken from founder's equity) ADDITIONAL TERMS Dividends: The Series A Preferred will be entitled to receive non- cumulative dividends in preference to the common stock, at the rate of 8% per annum when, as and if declared by the company's board of directors. Liquidation preference: Convertible preferred with a 1x preference (No participation) Anti-dilution: Broad-based weighted average Mandatory conversion: Series A will automatically convert into common stock in the event of (i) the closing of an underwritten public offering net proceeds of not less than $50,000,000 and a pre-offering valuation of not less than $350,000,000, or (ii) upon the written consent of the majority of the Series A Preferred. Board composition: The board shall consist of 3 members: Two designated by the founder, and one from TruCost Venture Partners. Pay to play: No All other provisions not stated are in their most standard form. Robin Hood Ventures Term Sheet Summary THE OFFERING Investors: Investor #1: Robin Hood Ventures: 3,000,000 shares, $3,000,000 Investor #2: Other VC to be mutually agreed upon by RHV and the Company: 3,000,000 shares, $3,000,000 Amount raised: $6,000,000 Price per share: $1 per share (Original purchase price) Pre-money valuation: $6,000,000 Employee pool: 15% of the fully diluted post-money capitalization (taken from founder's equity) ADDITIONAL TERMS Dividends: Paid on the Series A Preferred on an as-converted basis when, as, and if paid on Common Stock. Liquidation preference: Participating preferred with a 1x preference and a 2.5X cap Anti-dilution: Full-ratchet Mandatory conversion: Series A will automatically convert into common stock in the event of (i) the closing of an underwritten public offering with a price of 6X the original purchase price and net proceeds of not less than $40,000,000, or (ii) upon the written consent of two-thirds of the Series A Preferred. Board composition: The board shall consist of 3 members: One founder, one from Robin Hood Ventures, and one from the other VC Founder vesting: Stock owned by founders will be 25% vested and the remaining 75% will vest over the next 36 months Pay to play: Yes CellFree - Background You are the founder of CellFree, a cellphone battery and charging unit that allows cellphones to charge wirelessly. CellFree has been in operation for 2 years. For the first year and a half you were able to self- fund your company with $50,000 which you had saved from working at your previous job. Six months ago, however, you realized that additional outside financing would be necessary to enable your company to keep growing at its current pace. To obtain this financing you went on AngelList, and secured an investment from South Philly Angels, a well-known local angel group, in the form of $300,000 in convertible notes. These notes carried a 10% annual interest rate, payable at maturity, and would be automatically converted into preferred stock at a 20% discount upon the raising of a Series A financing round. Over the course of the next 6-months you quickly used up these funds. Realizing that you would soon need new financing you went to work trying to drum up investments from the venture capital community. Within a few weeks, you received term sheets from two VC firms: TruCost Venture Partners and Robin Hood Ventures. TruCost Venture Partners is a well-known venture capital firm located in Silicon Valley. They're known for their past successful investments. They've recently raised their largest fund to date with $650M in committed capital. Robin Hood Ventures is a smaller, more recently established VC firm located in Philadelphia. They've raised $150M for their most recent fund and have had good success in their investments thus far. Together with your co-founders you need to review each VC's term sheet and decide which offer your firm will take. TruCost Venture Partners Term Sheet Summary THE OFFERING Investors: TruCost Venture Partners: 4,000,000 shares, $4,000,000 Amount raised: $4,000,000 Price per share: $1 per share (Original purchase price) Pre-money valuation: $5,000,000 Employee pool: 25% of the fully diluted post-money capitalization (taken from founder's equity) ADDITIONAL TERMS Dividends: The Series A Preferred will be entitled to receive non- cumulative dividends in preference to the common stock, at the rate of 8% per annum when, as and if declared by the company's board of directors. Liquidation preference: Convertible preferred with a 1x preference (No participation) Anti-dilution: Broad-based weighted average Mandatory conversion: Series A will automatically convert into common stock in the event of (i) the closing of an underwritten public offering net proceeds of not less than $50,000,000 and a pre-offering valuation of not less than $350,000,000, or (ii) upon the written consent of the majority of the Series A Preferred. Board composition: The board shall consist of 3 members: Two designated by the founder, and one from TruCost Venture Partners. Pay to play: No All other provisions not stated are in their most standard form. Robin Hood Ventures Term Sheet Summary THE OFFERING Investors: Investor #1: Robin Hood Ventures: 3,000,000 shares, $3,000,000 Investor #2: Other VC to be mutually agreed upon by RHV and the Company: 3,000,000 shares, $3,000,000 Amount raised: $6,000,000 Price per share: $1 per share (Original purchase price) Pre-money valuation: $6,000,000 Employee pool: 15% of the fully diluted post-money capitalization (taken from founder's equity) ADDITIONAL TERMS Dividends: Paid on the Series A Preferred on an as-converted basis when, as, and if paid on Common Stock. Liquidation preference: Participating preferred with a 1x preference and a 2.5X cap Anti-dilution: Full-ratchet Mandatory conversion: Series A will automatically convert into common stock in the event of (i) the closing of an underwritten public offering with a price of 6X the original purchase price and net proceeds of not less than $40,000,000, or (ii) upon the written consent of two-thirds of the Series A Preferred. Board composition: The board shall consist of 3 members: One founder, one from Robin Hood Ventures, and one from the other VC Founder vesting: Stock owned by founders will be 25% vested and the remaining 75% will vest over the next 36 months Pay to play: Yes