Standard Venture Capital Terms That You Need to Know

An article we liked from Thought Leader Alexander Jarvis:

Seed round convertible, priced and SAFEs. What venture capital terms are standard?

What are the standard venture capital terms?

Good question, right! So you are fundraising and you have interest from a venture capital investor. Blue Shirt Capital have issued you with a term sheet and now you need to figure out what venture capital terms are kosher, where you are being taken advantage of, and what you need to negotiate for. Only, what terms are normal?!

Fortunately I found a report that was done 2015 in the United States (obviously) by a law firm that specializes in venture capital. For early stage deals the numbers are pretty good. They don’t have numbers for everything, so Fenwick & West have a quarterly report for later stage deals. When I reference later stage deals, I am referencing this.

In it you can see what venture capital terms are standard for:

Convertible notes
Priced rounds
SAFE notes

So next time an investor tells you what terms are standard, check this out and call BS if needed. I have seen the most egregious term sheets from private equity investors who will say “trust me, I know what I am doing.”

Convertible note standard venture capital terms

Average convertible note size: $1 million
Number of investors: “party rounds”Are pretty common here, The average is 13
Interest rate: 4% to 8%, 60% of the times
Conversion discount: 20% is standard, 70% of the time
Valuation cap: $7.5m
Conversion valuation caps: Caps are totally standard. They are used 95% of the time
Warrants: Never used
Conversion at change of control: This is standard, 70% of the time
Change of control premium: This is not standard, but...