Last month I attended a workshop run by lawyers on "Nuts and Bolts of Investment Term Sheets." The Connecticut Venture Group hosted the session, and Eric Dale of Robinson & Cole and Mark Kaduboski of Wiggin and Dana ran the workshp. These attorneys did a great job taking the audience of entrepreneurs and investors through the key sections of a term sheet. The biggest thing I learned is that it is essential to have a good attorney on your side, if you're going to sign one of these documents in the process of raising capital.
It's easy for the layman to miss key points that take rights away. Face it. Every entrepreneur wants to raise as much capital as she or he can, while giving away as little of the company as possible. The investors want to get as high a return as possible, and sometimes, they believe that requires taking a big chunk of ownership and rights away from the founders. You need a lawyer to help you. The investors certainly have lawyers.
In future posts, I'll go over the other points I picked up from this excellent workshop. Stay tuned.