You’ve finished your planning and assembled your pitch deck. Now it’s time to make your pitch to Seed investors. In this blog post, we discuss the key components and language to include in your Term Sheet.
Q: I’m putting together my pitch deck and frankly, I have no idea how an entrepreneur would typically present their “ask” in a seed round. Can you provide some example language?
A: While Series A preferred venture capital investors are typically calling the shots and pricing the deal for a venture round, in the early stages of raising seed capital from investors, entrepreneurs are typically presenting the terms. Usually, the capital comes in the form of equity or convertible debt. (Convertible debt is a loan from an investor that is paid back in the future when it is converted to equity in the borrowing company).
Seed rounds can get complicated because they are often comprised of half a dozen or more angels. If there is a lead angel that is putting in more than the others and is taking on a leadership role in shepherding the investment - such as a board seat - they will likely step forward to negotiate the terms and “price” the round.
When you start socializing your seed round, you will definitely want to put a stake in the ground on your terms. I recommend that you present a very clear summary of the terms that answer most questions in one fell swoop. It is very frustrating to have to drag out the details of a potential investment one deal point at a time.
Here's an example of what I mean regarding a nice summary view of the deal terms of the seed round that you should consider including in your pitch deck for prospective angel investors:
One of the features we built into our Cap Table App is an Investor Return Summary (with a proceeds waterfall showing in the figure below) that clearly shows investors of all classes what your plan looks like for them.
Our Cap Table App enables you to easily run multiple “what-if?” scenarios to gameplan different types of investments in multiple future rounds and evaluate investors’ returns.
When you settle on a scenario that you like, the Proceeds Waterfall makes it simple to discuss and negotiate the capital raise terms and settle on a mutually-agreeable deal.