ShmoopTube

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Finance a la shmoop what is a term sheet Horny

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bulls inc is a genetic laboratory specializing in making really

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long horned cattle They're raising money from investors to extend

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their business into goats rams sheep and especially unicorn In

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fact they hope teo be one someday inside silicon valley

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Joke like eight people are now laughing really hard All

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right The ceo calvin mick meet awaits the terms he'll

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be offered for raising his be round of capital from

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investors He signals the amount he wants around ten million

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box But what matters to him are the terms under

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which will raise that money like one term revolves around

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how much are what percentage of his count pany that

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ten million buys does ten million by half the company

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like was a ten million dollar four And then they

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put in ten And that buys half or was it

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twenty before In the ten million buys a third Or

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was it forty million before In adding ten minute buys

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a fifth Or was it ninety million before in the

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ten million ad buys a tenth Yeah well obviously he

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wants to keep a cz much of the companies he

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can for himself and for the other investors and for

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the employees who have a you know a stake in

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it Tight We'll stop doing that So one term is

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the valuation Another term on the term sheet is the

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type of stock that the investor wants to buy for

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the ten million bucks she's probably putting in Is it

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common stock Is it preferred stock Is it special convertible

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preferred stock that carries a liquidity preference such that be

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round investors might get like three times their money back

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before everyone else gets a dime Yeah it's a another

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set of terms Got it Alright Next term Is there

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a board seat that comes with this investment Like the

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people who are investing in this be round Do they

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get a guaranteed board seat No matter how many shares

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they own or what percentage of the company they own

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that kind of thing Alright next term how big is

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the option Cool to attract proven talent from the genetic

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modification industry Like you gotta spend a lot of options

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to get someone to leave genentech to come to a

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risky little start up like this right Alright next term

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Does the founder of the company get any special rights

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or is he just a common shareholder like all the

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other employees like does he have a guaranteed title or

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a guaranteed job or some guaranteed hey out or or

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some guaranteed set of steak knives or some like that

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All right well lots more terms might be included in

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this term sheet that he'll evaluate All right we didn't

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stop did we And term sheets don't exist on ly

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For investors buying stakes in companies they exist for basic

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business deals as well so pretty simple But if you

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can go back and watch this video again so that 00:02:46.66 --> [endTime] you're not utterly confused Oh my

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