Colin Barry

Term Sheets, Day 2 (EF, Thursday, Week 4)


Technology transfer from universities: be very careful that you are getting terms that make sense for your firm. Patent licenses with a lot of fixed fees attached make sense for large pharma companies, but are the kiss of death for small biotech firms.

Founders agreements are useful for articulating expectations between founders and outlining early-stage plans, but will be nullified/re-negotiated as soon as your firm gets a first round of funding.

"The longer an executive negotiates his employment agreement, the shorter his tenure at a company." -- Lawyer-guest in EF
Don't spend a ton of time entrenching yourself in an enterprise; it is counterproductive.

Lens to think about deals => How will this impact your future ability to:
-- Raise money
-- Conduct an IPO
-- Get purchased by a strategic buyer

Incorporate early. Don't be too loose with equity.
If you wait to distribute equity until your firm is ready to receive funding, equity distribution will have painful personal tax implications. Give out equity early while it is cheap.
Don't set aside massive option pools. Pools count as outstanding shares, and basically decrease a firm's pre-money valuation from management's perspective. You can always figure out how to increase the size of an option pool when you want to hire someone useful.