Venture financing term sheet generator

Wilson Sonsini just posted a nice tool on venture term sheets. I don’t know how many people might use it to actually generate a term sheet, but it is not a bad way for entrepreneurs and new investors to learn about term sheets and the associated clauses. i can tell by my own limited experience that typical term sheets are much simpler than the form this tool would generate. That said, investors and entrepreneurs should know what terms could be put on the table, what they mean, and how to negotiate them…

http://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/termsheet.htm

From their website:

WSGR Term Sheet Generator

This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents.

Because it has been designed as a generic tool that takes into account a number of options, this version of the term sheet generator is fairly expansive and includes significantly more detail than would likely be found in a customized application.

Biofuels/biochemicals, automotive, Green Tie Gala

A few articles that focused on some of the sectors that I am looking at these days. Check them out…

Xconomy:
Never Mind That Bailout: Venture Funding for Auto Innovation Accelerates As Startups Race to Leave Detroit in its Own Dust by Bruce Bigelow
Plunging Oil Prices Require Alternative Fuel Startups to Take a Long View by Bruce Bigelow

C|NET
Eyes turn to auto start-ups’ funding, aid requests by Martin LaMonica

with Governor Duval Patrick (MA) at the annual NECEC Gala

And finally, a nod of thanks to the New England Clean Energy Council for inviting me to their first annual Green Tie Gala. It was a great event, a celebration of the ‘energy’ present in the New England area to promote and commercialize clean energy technologies. New England has certainly become the hot bed of cleantech startups, but more importantly, the Massachusetts government has shown its leadeship by staying way ahead of the everyone else in sponsoring, promoting and providing support to clean energyand energy efficency initiatives in the region.  Kudos to Nick D’Arbeloff, Trish Fields,  and the rest of the NECEC team.

Where to raise money: bootstrap, angels, or venture capital?

Where should entrepreneurs turn to for investors is an important topic. I regularly see entrepreneurs dealing with this question, esp. the first-time entrepreneurs, often because each venue requires significant time and effort.

So if you are putting together a business idea with your best buddy, where should you look for funding?

Bootstrapping: Are you confident enough and have the means to bootstrap for a while? Can you save some equity along the way or are you being penny-wise, pound foolish?

Angels: How do you find the right angels? Is this dumb cash, or smart money? How many angels is too many? What to do if they become damending, like a seat on the Board?

VCs: Is your business idea ready for VC prime-time? Are you still sellable if it is shot down by a few leading VCs? Are they sharks that one must avoid at all costs?

I have these discussions with entrepreneurs all the time. Frankly, while there are general thoughts around this question there is no perfect answer. It all depends, on the idea, on the team, and the people involved – not to mention the investment climate in the space you are working on. But here I want to link to an interesting extract from an article by Ananad Rajaraman on GigaOm. Read on:

Early stage VCs raising later stage funds, including private equity/hedge fund

Cleantech companies typically require a lot of capital before they become profitable and bring success to their investors. Investing in them can be rather strange business for all the IT/media/tech investors (which is a majority of the the VCs out there) who are used to deploying smaller capital amounts to reach commercial success. John Doer told us (again) just last week that Google required a total investment of merely $25million!

So what are early stage cleantech venture investors to do when their portfolio companies require >$100 million before scalability of technology is proven and reached? To prevent dilution VCs have to keep on investing in subsequent rounds. But doing so might require slightly difference investment vehicles, and probably a different set of professionals.

So that is exactly what they are doing! Many major VC firms are raising large funds solely focused on later stage financing of energy/cleantech companies. Private equity investors and investment banking professionals are in demand and they are joining leading firms in large numbers. Kleiner Perkins, Sequoia, etc…‘they are all doing it’, as a VC remarked to me. Interesting!

Here’s the news on Seqouia Capital from the PE Week Wire.

Asset diversification has become business as usual in private equity, as many top-tier firms have launched distressed funds, real estate funds, hedge funds, sub-debt funds and other things that don’t involve privacy or equity (let alone both). Venture capital firms, on the other hand, have mostly stuck to their knitting. Sure, you can argue the demerits of certain firms moving toward later-stage deals or raising country-specific funds, it most of it still falls within the conventional rubric of venture capital.