How To Handle an Exploding Term Sheet

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

An exploding term sheet is one that comes with a specific deadline, including a time of day and date.

It often gives the founder very little time to make a decision.

For founders receiving an exploding term sheet, consider the following:

Most of the time, the investor will invest beyond the deadline.

In many cases, the investor is very busy and needs to get things done.

The deadline date is meant to progress things in a timely manner.

In most cases, the deadline is not enforced.

Term sheets are not legally binding.

Even if signed, they are not binding until the subscription agreement is signed and the funds transferred.

Before that, there is recourse to back out of the deal.

Upon receiving an exploding terms sheet, consider what information needs to be discovered.

Set up a plan to gather the information.

Communicate that plan to the VC and ask for an extension if necessary.

In most cases, the VC will appreciate there's a definitive timeline to a close and will agree to it.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

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Key Factors Impacting Investor Returns

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Startup investors seeking higher returns should consider the following factors:

Due diligence -- there must be a meaningful amount of due diligence performed on the startup before investing to increase the returns.

At least twenty hours of diligence should be done for any investment.

Diversification -- it's important to invest in different sectors, stages, and types of startups.

The greater the diversification, the better the outcome.

Critical analysis of the startup -- most startups come with a great deal of hope and hype.

It's important to look at the startup and what is there today.

Valuation -- the price you pay for the equity is a critical factor for a successful outcome.

Look for ways to gain a better valuation on every startup investment.

Fees -- look at the fees for any startup fund or syndicate investment.

It's important to uncover any hidden fees built into the deal.

Comps -- look at similar companies to see how well they fared in an exit.

Consider these key factors for your startup investing.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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Building a Startup Portfolio

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Startup investing requires a portfolio approach.

Here are some best practices for building a startup portfolio.

Determine how much time and investment dollars to allocate to startup funding.

This could be done on a total allocation basis or on a time basis such as annually.

Determine how many startups to fund and at what check size.

Consider breaking the startup allocation in half and initially investing the first portion.

In a follow-on round, consider if you should invest the second half into that startup.

Beware of emotional investing.

This comes from investing based on the quality of the pitch or the emotions the pitch raises.

Match the risk to the reward.

The greater the risk, the higher the potential reward must be.

While investors most often choose the startups they want to invest in, the best startups typically choose their investor.

Look for high-quality startups to engage and invest in.

Finally, avoid turnaround situations.

Consider these points in building your startup portfolio.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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For Investors check out: https://tencapital.group/investor-landing/
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What To Include in a Due Diligence Report

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

The due diligence report is written by the due diligence team.

It covers the financial, operational, legal, and strategic aspects of the startup.

A due diligence report for a startup investment contains the following:

Market analysis

This includes the size, growth rate, sectors, competition, and the startup's target customer.

Product.

The diligence report assesses the product for competitive advantage, defensibility, and scalability.

Financial.

The report reviews the financial projections to see if they align with the startup's team, product, and market opportunity.

Team.

The report covers the team's experience, skills, and industry knowledge to see how well it matches the startup's requirements.

Exit.

Reviews the various exit strategies and how to achieve them.

Here are the components of a due diligence report:

Executive summary

Purpose of due diligence

Financial

Legal

Operational

Market

Regulatory

Assets

Risks

Growth prospects

Conclusion

Appendix with supporting documentation

Consider these elements for your due diligence report.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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Using the Four-Quadrant Slide

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In pitching the startup, the founder shows how the business will be positioned in the market.

The four-quadrant slide is one tool to show how the startup compares to the competition.

Here's how to set up the four-quadrant slide.

Start by identifying the key criteria for customers.

This could be cost, performance, ease of use, or more.

Check the competition for how they rank on the criteria compared to the startup.

Choose the top two criteria and show how the startup's product performs.

Lay out an x/y axis and show one criterion on the horizontal axis.

Show the other criteria on the vertical axis.

Label the axis so the startup is positioned in the upper right corner.

Position the competition in each of the other three corners.

This communicates to the investor how the startup will compete and on which criteria they are superior.

This helps the investor understand the startup's position compared to the competition.

Consider using the four-quadrant slide in your pitch deck.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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On this episode of Investor Connect, Hall Marchant welcomes Gillian Fenton of LST Strategies, who brings more than 30 years of experience in licensing intellectual property and life sciences transactions, including work with GSK, Emergent BioSolutions, and Biogen, as well as university startups, established life science companies, and investors.

Gillian shares how IP supports life science companies from inception through commercialization, explaining that patents are critical for protection and investment attraction, but that trade secrets, contractual rights, and IP-adjacent protections like FDA data exclusivities can also be central depending on the technology. She covers where startups underestimate licensing complexity—especially that licenses create long-term relationships unlike acquisitions—along with what "transaction readiness" looks like, including building a populated virtual data room early.

The conversation also addresses due diligence red flags such as chain of title, freedom to operate, and misaligned global patent spending, plus how diligence and FTO depth should scale as clinical programs advance. Gillian explains how Bayh-Dole obligations, government rights, US manufacturing requirements, and march-in rights can shape commercialization over a technology's lifetime, and she emphasizes aligning legal strategy with business strategy while adapting to disruptions in funding and the growing role of AI.

Visit LST Strategies LLC at lifesciencetransactions.com

Reach out to at www.linkedin.com/in/gillianmfenton, and on gillian@lifesciencetransactions.com

________________________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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Why Build a Financial Forecast

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Startups should build a financial forecast for their business.

Even if the future is uncertain and all the data is not known, it's still important to build one.

Here are the reasons why:

It validates the founder's hypothesis.

A founder should have a hypothesis about the business.

A financial projection helps determine its feasibility.

It also determines how much funding to raise.

The financial forecast shows the cost to start and run a business.

The fundraise amount is a key component of the plan.

It communicates the plan to investors.

The investors want to know what the founder is thinking about the business.

This includes the growth rate of revenue, the size of the team, and the cost of doing business.

It demonstrates the business can become profitable and scalable.

The financial forecast also shows when the business will become profitable and how much money could be generated by it.

Founders should include a slide in the deck for the five-year financial forecast.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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For Investors check out: https://tencapital.group/investor-landing/
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Be Founder-Friendly To Gain More Dealflow

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Founders live in the center of the startup world and thus see many companies raising funding.

A startup investor will do well to tap into the knowledge of founders about other startups raising funding.

An investor who treats founders well will find they are often amenable to making referrals.

Here are some key steps on how to be founder-friendly.

Be timely with founders' requests for information such as signed term sheets and invested funds.

Make life easier on the founder, as they have plenty of other investors who will end up taking their time for special questions and unique situations.

Follow up investor updates with helpful information and words of encouragement.

As often as possible, try to help with founder asks including introductions.

Update the founder on what you are looking for in startups.

Ask for introductions to other founders where they fit the investment criteria.

Develop an expertise or skill that founders need and build a reputation for providing some level of it at no cost to founders.

This will give founders an easy way to introduce the investor to other startups.

Consider these steps for being founder-friendly.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_______________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

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