Seed terms have gotten much better, but I still find Series A (and beyond) term sheets frustrating. I think we can change the “norm” by offering entrepreneurs a better alternative. So if you have terms you don’t like, it’s time to try object-oriented capital (OOC).
Venture capital term sheets are neither simple nor easy to understand. The spaghetti code of VC terms include things like:
These are baked into term sheets as “standard” in every deal I see.
However, there is another option — and it’s one most VCs don’t like because it violates their “norms.”
Object-oriented capital (OOC) is when you, the entrepreneur, can pick the objects (terms) you want, and we adjust the data attached to those objects to fit your priorities, e.g.:
The concept of OOC is that terms, like code, are modular and trade-offs are logical. You select the objects (annoying terms) you most want to control (No to preference, Yes to pro rata, No to “we must own 20 percent,” No on budget veto, No on veto on sale, Yes on ROFR) and we fill in the remaining objects and the data (investment amount, valuation, etc.) to execute on those objects.
However, if other investors aren’t on board with the idea, typical VC terms seem to come back into the deal. So at Flight.vc we’ve started writing bigger checks in order to set the terms of the round rather than just following. This means seven-figure checks instead of the typical six-figure round on AngelList.
