All Hands: A Tale of Two Terms Sheets

By Anne Beyer, Robert Siegel, Alessia Morales
2023 | Case No. E822 | Length 9 pgs.
In this case study, students will explore some of the differences and considerations that may emerge when entrepreneurs evaluate and choose between multiple financing offers from venture capital investors. The case follows the two founders of a fictional company, All Hands, as they raise a Series A financing round. The founders have received term sheets from two venture capital firms that differ not only in the valuation of the firm’s equity but also in other important financial and non-financial ways, including preference structures, dividends, anti-dilution protection and governance. Students will put themselves in the position of the founders to identify differences across the two term sheets, evaluate potential economic and governance tradeoffs, and develop a point-of-view on which offer they would accept.

Learning Objective

This case will help students to:

  • Understand how to evaluate and compare term sheets. It includes two, distinct term sheets. Students are asked to highlight differences, grapple with the implications of those differences, and determine which term sheet they would choose (and why).
  • Analyze the impact of deal structure on economic value for founders. Students will be asked to calculate the differences in founder payoffs associated with each deal for a range of potential scenarios, taking into account preference structures, dividends and anti-dilution provisions.
  • Learn about how challenging it can be for founders to not only understand terms, but weigh their consequences. Students will learn that deep analysis can often yield hidden terms and tradeoffs that need to be carefully considered ahead of decision-making.
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