Founders are often tempted to include some of the following terms in pitch decks.
— guidance on valuation
— how much a startup is seeking to raise
— liquidation preference
— price per share
However, in its SEC Comments the Securities and Exchange Commission said:
If a presentation by the issuer does not involve an offer of a security, then the requirements of the Securities Act are not implicated.
As a result, in publicly available pitch decks, which may be distributed beyond your knowledge — it’s critical that you not include any terms — just keep to the business plan. Often a startup is expected to state how much money is needed in the next 18+ months. Make sure that’s not stated as an offer to invest.
If you do need to include such terms… do so only to specific confirmed accredited investors, such as venture capital or organized seed funds.
Of course, this becomes more tricky in demo days or angel forums, which is why everyone who attends those is required to sign accredited investor status certificates.
It becomes especially tricky when angels and funding groups are more loose, or when founders are out pitching angel deals one-on-one, like I often see. It’s a tendency for founders to want to be informative and transparent with the fund raise — but the pitch deck is not the place for it.
The pitch deck is to present your business, not offer the deal terms.
If you are asked about an investment by a prospective angel investor, then it’s best to have a term sheet with the right language to ensure compliance with these rules. Other than follow on investments, don’t offer a term sheet to venture capital or seed investors, it’s their role to prepare that.
What happens if you don’t comply? Well, those found to be in breach face a 1-year penalty box on fund-raising.
That’s right, if you trip up these rules you can be subject to a penalty of no fund raising activities for 12 months.
In general, in investor slide decks keep the deal terms out of it — it’s up to investors to set terms anyway.
See More: Silicon Valley Counsel
