Almost every startup founder, who raised money, is aware of the pain of completing legal formalities. Most of the first time founders are not familiar with the terms and conditions that are used in funding documents. We, as startup founder wish to focus more on startup growth than understanding internals of funding procedures.
Here termsheet.io accelerates the deal-making once you found an investor for your startup. Currently focused on the facilitation of seed investments, the TermSheet team employs every possible tool, tactic and strategy to remove bottlenecks and hurdles in the conduct of these deals. That means working on three angles - qualifying angel investors and founders, orchestrating or syndicating funding rounds and finally, closing deals (locking in commits, managing payments, preparing paperwork).
Story behind termsheet
In 2014, Vivek Durai, the founder of a contract automation startup called Humble Paper, started an initiative to improve the fund-raising experience for founders and investors. He began by releasing a set of legal documents on a creative commons license for use by anyone - investors, founders, even lawyers, in early stage startup funding rounds. Anyone could download the forms from the Internet and use them as-is to complete a deal.
The idea behind it was that most early stage funding rounds are capable of standardization and do not require lengthy negotiations or back-and-forth involving lawyers. And far too many such deals go sour because of the terms. Even when they don’t, the bazaar mentality that clouds discussions involving funding results in some level of friction and distrust between the people involved.
When investors extract more than their pound of flesh in an early round (say through excessive liquidation preference) this has an adverse affect on the founder as the startup proceeds to raise funds in successive rounds. This is because, typically, each incoming investor uses the previous round’s terms as a baseline and then asks for more.
The open source experiment worked and rapidly evolved into something new. Over the course of November and December 2014, Vivek pivoted Humble Paper into TermSheet.io, a fund-raising platform for startups. Using the tagline, “Zero-Friction Seed Rounds”, TermSheet.io launched in December 2014 with the goal of discovering startups, orchestrating angel syndication and then closing the rounds using standardized documents and protocols. “Simply put, TermSheet’s goal is to scale early stage capital, but to do so in a qualitatively superior fashion. We’re in the business of discovering and supporting high-calibre founders.”, says Vivek.
“It isn’t easy”, says Vivek. “One of our internal metrics is the time it takes to complete all filings for a deal. Having even a single non-resident investor participate in a round increases the time it takes for filings to complete. Banks need to be sensitized to working with us on accelerated timelines and overseas banks, especially in the US can often be less than cooperative.”
The six-member TermSheet team based out of Chennai’s IITM Research Park, works both on deal-making and on technology, and is expanding. “We’re hiring, but we’re very selective because it takes a certain kind of fearlessness to be a part of this. We want to be in this game for far longer than this current startup frenzy.”, continued Vivek, “Our stated goal is to accelerate deals but in the early stages that also means we had to carefully choose who we wanted to work with. During the early stage of a startup, experimentation and learning is key, and we’ve spent considerable time doing just that.”
They have already helped startups Cupick, Aisle and LiveBraille in raising funds. They also helped Ather Energy with the closing part of their seed round.
Their business model is simple, they charge one percent of the amount raised for larger deals and two percent equity for smaller deals where they help startups with more than just funding. Their biggest competitor in India is Letsventure. Global leader in startup funding platform is Angel.co
Termsheet also announced a fellowship program for founders to volunteer and help other founders. Moneyball, an event format that introduces a select and limited number of founders to angel investors (and a limited number of VCs) in discussions mediated by TermSheet fellows.
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- Angel investor
- Venture capital
- Private equity
- Financial economics
- Vivek Durai
- startups in India