As Venture Deal Terms Narrow, TTOs Should Focus on Investor Quality

Universities — via their TTOs — often receive equity as partial consideration for technologies they license to start-ups. Most of these ventures will raise multiple rounds of financing. As relatively small, junior shareholders, TTOs typically are deal term “takers” with limited ability to impact the deal terms of follow-on rounds. A recent survey of venture deal terms strongly suggests that in most cases this is not a liability, as the remarkable commonality of deal terms reflects limited negotiability in any case.

In connection with the release of an updated version of its Series A Model Term Sheet last year, the National Venture Capital Association (NVCA) included survey results provided by Aumni based on data from “100,000 venture transactions, representing over 40,000 investors with a combined network of over $1 trillion in assets under management.” This summer, Aumni released an updated version of the data companion that includes 2020 data and more data fields. (For details on the updated model term sheet, click here.)

Roughly 40% of the data fields included in the Aumni survey relate to the frequency with which certain deal terms are found in financing transactions. For example: “What is the frequency of 1x preferences?”

The results are reported by funding round. While most experienced players in the space likely already know the market norms for each of these deal terms, what is truly striking is the degree of conformity. Identical deal terms are present in 80% to 90% of financings — usually with the most company-friendly option.

Read the full article here.

Dror Futter focuses his practice on startup companies and their investors, and has worked with a wide range of technology companies. His fifteen years’ experience as in-house counsel includes positions with Vidyo, Inc., a venture-backed videoconferencing company, and New Venture Partners, a venture fund focused on corporate spinouts. Prior to that, Mr. Futter was Counsel to the CIO of Lucent Technologies, as well as supporting parts of its sourcing organization. Read more here.