Honey, I shrunk the term sheet!

For french readers : in the US most seed investments are now on SAFEs (West Coast) and convertible notes (East Coast). When it’s an equity round, the term sheet mostly follows the NVCA template.

As an early-stage fund, we believe our value-add lies in the ability to accelerate start-ups.

In France, it takes too long to close a deal — 12 weeks on average. Precious time that could be dedicated to the company’s operations is being redirected towards non-productive legal discussions. As a result, we took a hard look at our investment process to trim it down and get closer to our american colleagues. We now have a six-weeks long investment period from first meeting to signature.

Before we get started, and in full transparency: here is our brand new and simplified LOI.

What’s wrong?

For years the French ecosystem has been obsessed with negotiating clauses, often for nothing. Here is an example and the corresponding LinkedIn conversation about it:

Both the entrepreneurs and the investors are paying for this zealous excess.

In the US, in case of a SAFE or a convertible note (95% of seed fundraising), lawyers are seldomly involved. And edits are typically made in a side letter investors signed with the entrepreneur. Example of a side letter here. As a result, Americans can close a deal in three weeks time from first meeting to money wired. At Newfund, our shortest deal in the US took 14 days from intro to closing.

How did we get there?

On average, we used to spend 12 weeks to cover the full investment process from a first contact to the money in the bank account for our French deals.

True story. Here are two investments made in the past. The difference is spectacular and it was a trigger for us.

In the case of start-up 2, the start-up was responsive and answered our e-mails on the same day. The investor was entirely focused on the investment. For the closing, there was almost no negotiation by the start-up and for the points that remained to be adjusted, we were also more flexible than usual because there were only a few and the founder demonstrated she was playing ball. Our goal right now : deal with start-up #2-like only.

Our commitment

We want to hand you an LOI within four weeks from our first contact and wire the funds two weeks thereafter.

Instead of discussing clauses that are unlikely to ever be triggered, we are simplifying our documents. And we want to use that extra time to involve our operating partners before the investment. This way, entrepreneurs stay focused and realize before the investment the value that Newfund can bring.

Resolution #1: We changed our terms

We surveyed the market for best practices. The ‘classic’ clauses of our typical shareholder agreement remain fundamental as we have a responsibility towards our LPs. We changed or deleted the clauses that happened to be the most frictional.

Our new terms & conditions are summarized in the LOI (for Letter of Intent) you can access it from this post’s introduction. They’re pretty straightforward. The idea behind it is to limit the back and forth in order to focus on what really matters, the business! We believe that, with this new Term Sheet, we will reduce timing to 2 weeks from Term Sheet to Signature.

As a reference, Point9 is also transparent , take a look at Point9’s TS. Actually our terms & conditions are quite similar : VCs should not play differentiation in the legal docs.

Resolution #2 : Start working together before closing

We use this incompressible time (when lawyers are working on legal documents) to focus on a 12-month action plan. Working together once the investment committee has made its final decision is the best way to start an entrepreneur-investor relationship.

Fréderic Krebs, sales and marketing operating partner, refines the roadmap and selects the right service providers with the founders.

Patrick Malka, co-founder of Newfund and operating partner, relies on audits to propose solutions for financial mentoring and eventually the structure of the company.

Henri Deshays, partner of Newfund and based in Silicon Valley, would be working on an international US plan with your team.

You should be able to launch THE plan as the funds are released.

If you wish to raise your seed round at lightspeed:

• read our investment thesis here to make sure there is a fit
• answer a few questions and we’ll be happy to give you feedback.

In a nutshell, we are a transatlantic seed fund. We write first checks from €300k to €800k in equity rounds up to €1.5m, and do follow-ons. We are pre-PMF with at least a paying client (MRR of €1K to €40k). We’ll get back to you in less than 48 hours once you contact us using the link above

Your feedback is priceless, feel free to ping us at anne-sophie@newfund.fr.