Here’s a new batch of standard European term sheets for founders and investors, brought to you by Seedsummit



Later this month, Seedsummit will publish a range of “standard” term sheets and other legal documents for European startup founders and investors. Some of them are updates of documents that were released earlier, some of them are brand new. They should be a great help to all startup founders  talking to investors about terms of the investment.

We called Carlos Eduardo Espinal from Seedcamp/Seedsummit to ask him a bit more about the project – isn’t all that legal legwork going over and above what’s expected from an accelerator? Not really, he says. In a way, it’s a logical thing for an organization that wants to build ecosystems around Europe.

Carlos Espinal: “Since starting out in 2007, one of the things we noticed was that companies would get into deals with investors who weren’t that familiar with startup terms. And they would end up with legal situations that were just overly complicated.”

“In the US, there’s the Series Seed documents, and we wanted to do a UK version of them. We wanted to offer founders and investors some kind of document that they could use as a touchstone – what to expect, how is this done mostly. So we got in touch with 27 investors to discuss some standard terms with them.”

The investors are listed on the Seedsummit web page, and they look like a who’s who of European VC’s and angel investors: Index Seed, Earlybird, Kima Ventures, ISAI, Bertelsmann Digital Media Investments, GIMV,… the gang’s all there.

Their input resulted in a standard European term sheet that should offer support in the negotiation process, says Espinal – but don’t expect it to make the negotiations unnecessary.

“It’s not that we want to standardize terms or valuation, that would be counterproductive. ”

“The idea was rather to have a document that tells founders more or less what to expect, and that also tells the investors how other investors work. That prevents investors from negotiating very punitive deals – which hurt the startup and sometimes the investor afterwards, because they make it harder to find follow up funding. It really benefits both sides.”

Recently, Seedsummit worked with the UK tax authorities to draft documents to make sure that investors and founders can benefit from the UK tax relief scheme for angel investments, Espinal explains.

“We talked to HMRC (Her Majesty’s Revenue and Customs) to create a document that is compliant with the tax relief scheme. There was some confusion about what startups and investors needed to do to benefit from it. Now everybody has the same information, founders know what to expect and investors too, and it satisfies the criteria.”

Seedsummit also offers a founders collaboration agreement, and will release additional documents for fundraising (which are still under development). The goal is always the same, says Espinal: to reduce friction.

“We set out to create documents that everyone can read and understand, and that lowers legal costs for both startups and investors. We want to reduce the friction in the startup scene. Not just by creating documents, but also by introducing more startups to angel investors. And by introducing angel investors to each other: that way they can syndicate and do more deals. It’s all about getting more and better deals in Europe.”

Espinal is not keen on answering the question where – apart from in disparate terms – the biggest source of friction is in Europe.

“That’s a very macro question. There are a lot of other smart people asking themselves how governments and stock markets and corporations can boost the startup ecosystem. We can’t control everything in that macro, it would be a bit ambitious, for example, to change how the Italian government does tax relief for investors. We can only do certain things: like how to get investors talking to do more deals. That’s where we cap it.”

After a bit of nudging, he says he thinks the flow of human capital in Europe could still use some help. “Uniform, easier immigration rules across Europe for founders. That would solve a lot of issues, and it’s not an unreasonable demand, I think, it’s just something that makes sense. Also: it would be great if Europe could harmonise the tax relief schemes for investments. That would have the same level of amazing impact on the startup scene.”

But the European enterpreneurial scene did come a long way since Seedcamp first pitched its tent, he says. “In 2006 – that was before the financial crisis still! – the cost of starting a business was high. There was hardly any seed capital available, not many startups were doing capital efficient businesses, there were no support groups for young founders. All those things have arrived in the meantime.” Entrepreneurship has become a lifestyle? “Not Europe-wide – but you can see it in the hubs, in London, Paris, Berlin. It’s progressing.”

Useful links:

UK Term Sheets, v2

European Term Sheets, v1

Founders collaboration agreement

[photo: c3o, Flickr]

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Raf Weverbergh

Editor of whiteboard. Raf Weverbergh was a magazine journalist whose work appeared in magazines like Rolling Stone, Playboy, Mail on Sunday, Publico and South China Morning Post. He is the co-founder of FINN, a corporate communications agency where he advises startups and multinationals on their PR and Mustr, the easiest media database for PR professionals. You can contact him on Twitter, Linkedin or Skype (rafweverbergh).

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