Connect with us


Before You Pitch That Idea, Understand Valuations: How To Read An Investment Term Sheet

At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti.

Inversk Review



Photo: Pexels

A term sheet in simple terms is the agreement an organization gets from investors while seeking funding. In this booklet, the investors discuss their interest and what they are bringing to the table. The owner of the company must be keen to clearly understand what the investors are after to avoid settling for a raw deal.

As we all know not all help is purely for the advancement of the company’s vision. Thereby, it is advisable in case someone does not clearly understand the terms in a term sheet to ask for guidance from a legal officer who will explain details clearly.

As explained earlier, the term sheet has different terms used to refer to assets in an organization. Investors are mainly attracted to a company because of its assets. In a term sheet, the word valuation means the value of the company in general. It is the net worth of the company.

There two types of valuation done while seeking funding. The valuation before an investor funds an organization is called pre-money. Pre-money means the company’s value has not changed its valuation. Post-money is the value of the business after funding. That means that the value of a business increases when investors invest in it. Below is a description.

If the pre-money value of a business is Ksh. 20 million and the post-money value is Ksh.25 million, this shows that the investors have invested Ksh. 5 million into the company. In percentage, the investors own 20 percent of the shares the company has.

The key element in this part is understanding that the higher the pre-money value of a company as compared to the post-money value; the higher the percentage stock ownership of the company the founders get to keep.

If the investors get the higher share they get power to make high-impact decisions to the company which can either build or destroy the company. Hence while reading the valuations of the company an individual should manage to understand the value of the company he is in charge of even after funding.

Another crucial part to look into is the cost of each share while seeking funding. The cost of a share that the founders buy and the cost per share that investors buy should differ. This is an area that has conflict of interest since both parties are looking out for their benefits.

There should be an agreement drawn for the cost of each share that will resolve the issue in a just manner that does not favor either the investors or the founders.
The board should have people who are representing each group’s interest with the group that has the highest shares represented fully. The representation should be done fairly so that there is fair representation of interests.

Also, there should be an agreement on the cost of a pre-investment share and the post-investment share. In that, the company agrees on the cost per share after the investor has pumped in some money in the company.

Since the valuation of the company has gone higher, the shares will of course become expensive thus there should be an agreement on how the profits should be shared and the costing of each share for the parties interested in buying.

A founder should check out on terms and conditions of the investors shares. If the shares belonging to investors are open for sale or not. This is so as some investors lock their shares even when other investors are ready to invest in the company.

On the issue of who gets paid first, the founder should have an agreement with the investors since some investors choose preferred shares that empower them to always get paid first despite the risks posed to the company. The dividends should as well be clearly stated the rate at which they are awarded.

Some investors can seek to get dividends even while it is an expense to the company. Therefore, it is advisable for a founder to understand that part as well. There is always a pool of share set aside in case a company runs bankrupt it acts as the insulation for the employees. These shares should be indicated who or how they are going to be arrived at.

Generally, a term sheet is not always good news for the company seeking funding. A founder who is seeking funding should have knowledge in all areas in regard to funding that can make him have losses rather than profits. If one is not conversant with the information on funding as stated earlier, it is safe to seek legal help to avoid financial losses. However, people who are ready to champion the growth of any organization under acceptable terms are a perfect opportunity for any company to blossom and reach its full potential.

Inversk Live is Kenya's most incisive and informative platform to learn about business news, technology, markets, companies, startups, leadership advise, curated business and industry opinion, and affluent lifestyles.

Continue Reading
Click to comment

You must be logged in to post a comment Login

Leave a Reply


5-Step Guide to Achieving Effective Communication for Business leaders

Kimani Patrick



As an entrepreneur, communication is a very important facet if you are going to grow your personal brand and grow your business to the next level

For you, is not just about exchanging information, it’s about understanding the emotions and intentions behind the information you relay and receive.

Effective communication is also a two-way street. It is not only how you convey a message so that it is received and understood by someone in exactly the way you intended, it is also how you listen to gain the full meaning of what’s being said and to make the other person feel heard and understood.

Apart from building trust, being an effective communicator means that your team can rely on you. You will build stronger relationships, employees will adopt your ideas, and you will reduce breakdowns as well as get more results for your business.

Being an effective communicator will also help you to understand other people better and when you understand them, you will relate to them in a meaningful way.

While you already know how to communicate, learning a few simple principles that can be applied immediately will make you an effective communicator and give you a huge advantage in today’s ultracompetitive business world.

Step 1: Be Friendly

When someone steps into your office to say hello, step out from behind your desk to shake his or her hand.

During a networking event or coffee break, don’t hold your beverage in a way that blocks your body or distances you from others. The higher you hold your coffee, the more of a physical barrier you put up between yourself and the person you’re talking to. Hold it closer to your waist, that way you will seem open and engaged.

Step 2: Keep Your Word

Doing what you say you will do when you say you will do it is the highest attainable level of disciple. When you promise someone something make sure you deliver within the agreed upon timeframe. If you are not able to meet your promise, communicate it in good time so that the other party can prepare for an alternative to avoid inconveniences.

Being disciplined in keeping your word communicates to people that you are a reliable and trustworthy person. This will help them want to keep you close and conduct business with you.

This also extends further to building your positive reputation and people will find it easy to recommend you whenever an opportunity shows up.

Step 3: Be Clear and Never Assume Anything

Assumptions are a major problem in communication, whether they are self-fulfilled assumptions or merely assuming that others see things in the exact same way that you do.

Never assume – the fact of the matter is that most people do not see things the way you do, nor do they have the same feelings as you do. The less you assume, the better. This falls in the category of making your communication is always clear.

Step 4: Be Authoritative

Even if you are friendly and down to earth, your relaxed attitude should never overshadow the fact that you are in control. When you are introduced to someone, stand tall, extend your hand, and introduce yourself by saying your name and what you do.

To sound authoritative, speak in a normal, conversational tone. And if you are a female, watch that your voice doesn’t rise at the end of a sentence as if you are asking a question or seeking approval.

When stating your opinion, use the authoritative arc, in which your voice starts on one note, rises in pitch through the sentence and drops back down at the end.

Step 5: Learn How to Talk Business

If you are trying to get someone to open up then try using open-ended questions rather than yes or no interrogations. When reviewing your own tactful, analyze how you approach people. Do you bully them with close ended questions or do you ask them in a positive manner how the both of you can make necessary changes to get a project, for example, moving more efficiently.

The more effective you can be with you communication the more successful you will be – personally and professionally.

Have more ideas on effective communication? Share them in the comments’ section below.

Comment using Facebook

Continue Reading


5 Murdered in South Africa as MTN, MultiChoice and Shoprite shut Branches in Nigeria amid Protests

News Team



Five people, all foreign nationals, have been killed in the ongoing Xenophobic violence and protests in South Africa.

The violence which erupted late last week has seen businesses owned by citizens from other African countries looted, property damaged and truck drivers from neighboring countries being targeted and torched in the violent attacks.

South Africa – Pretoria – 29 August 2019 – Calm restored in the Pretoria CBD following burning of foreign owned shops. Photo: Africa News Agency / ANA

In a retaliatory move, Nigerian protesters took to the streets of Lagos on Tuesday evening to vent their anger by throwing stones and destroyed properties owned by SA brands such as MTN, Shoprite and MultiChoice.

Dozens of shoppers descended on Novare Shoprite Mall in Lekki, near Lagos, Nigeria and looted goods of unknown value while torching a police truck. Several other SA owned stores including PEP, MTN were looted and property destroyed in Surulere and Jakande.

Following the protests, South African television group MultiChoice has shut its offices and branches in Nigeria and Zambia, “We have had to shut branches and offices to safeguard customers and staff until further notices,” said its head of corporate affairs Jabavu Heshu on a statement on Wednesday morning.

On its case, MTN Group said it had closed its stores and service centers in Nigeria “as a precaution” after four stores in Nigeria were attacked on Tuesday evening. Sources indicate that the company also closed several stores in Johannesburg. The company, in a statement condemned the acts of violence.

Shoprite Holdings said in a statement on Wednesday that several stores in South Africa, Nigeria and Zambia were closed and extensive damage had been done to several supermarkets over the past 24 hours.

“(Shoprite) is highly concerned about the acts of xenophobic violence against foreign nationals that sporadically flare up and the resultant rhetoric of intolerance that is levelled against foreigners and the platform this creates for criminals to exploit this,” the company said in a statement.

Comment using Facebook

Continue Reading


Go For Gold: Lessons From Chris Kirubi

Inversk Review



As an entrepreneur, you have to pursue and attempt to achieve the very best possible outcome or reward from the same activity, task or endeavor. Below is advice transcribed from a few of Chris Kirubi’s #AskKirubi show.

Gold is very symbolic to mean the fine things in life. You don’t find gold all around you, but you find at least somewhere close to you. Very scarce indeed. Does that mean it is not meant for everyone? It’s all in your mind. Reach out for the best possible solutions. Reach out for the biggest venture. Reach out for the biggest investment.

Gold is a great reward. Great things don’t come easy. You will struggle to get to it, but the fruits will be there. To be the best, you have to effect change. Don’t be afraid to effect the change. Within our comfort zones, we as entrepreneurs might feel like we have actually achieved it all. When that feeling crosses your mind, that’s when you need to move and effect change. Change is the only constant thing in the world.

Don’t say you can’t move. When you get that mindset, you will be poor. The worst thing you should avoid is being poor in the mind. Do not conform your mind to weak struggles. Conform your mind with strong struggles such that you will put more effort in your deeds. Challenge yourself and out great effort into that. Then expect great rewards.

Arm yourself with knowledge. Knowledge should be your weapon whenever you want to attack and get huge profit margins. Be hungry for knowledge and do not shy away from wanting to know more.

Go for quality. Quality begins with you. Be quality. Don’t be shady. How you look, is how you act. From what and how you dress, to how you carry yourself and interact. Look quality. Talk quality and expect nothing less of quality anywhere you venture into. When you are quality, you will definitely attract quality.

Build your own stature. No matter how difficult it may seem. It will cost you but it will be worth it. Do what you will be proud of. Quality will definitely make you a proud person.

Comment using Facebook

Continue Reading


Copyright © 2019 INVERSK MAGAZINE. Developed by ITIPS