Passion Capital Term Sheet for [Non-Hipster Limited]
We, Passion Capital, want to invest money in your company, [Non-Hipster].
Structure of Financing
We’re making you an offer of a £ [ ] investment as all or part of your seed round. This investment
will be for [ ] % of the ownership in your company. Your company will issue to us a new series of
ordinary shares which will have the same rights as your existing ordinary shares other than a simple
preference on the distribution of cash in the event things don’t work out as well as we all hope – see
‘Liquidation Preference’ below.
Our offer assumes that you already have or otherwise will allocate an employee share option pool
(typically an EMI option scheme in the UK) before our money goes in, so that our ownership is "fully-
diluted" after accounting for that option pool. We think you'll need at least a 10% option pool after
the investment round in order to hire some key management team members and senior people. To
make this really clear, see the attached table to see how this looks with actual shareholding and
ownership percentages after the investment.
If you don’t already have an EMI option scheme set up, we will pay for this for you once we are
shareholders as long as you use a law firm we have already agreed a fixed preferential rate with.
Conditions to Close
Before we sign the paperwork and transfer our money, we have to do some basic due diligence on
the company and also on you, the founders. This includes anti-money laundering checks and having
you complete a Founder’s Questionnaire. We also want to see that all of the company's relevant
employees and freelancers have signed employment or similar contracts which make it clear that
the company owns all of the intellectual property that’s been created for the business you’re
building. This protects you as shareholders, as well as us.
At the same time, if you haven’t already done so, you should also do a bit of due diligence on us. For