SpiffyTerm, Inc.: January 2000

Case Solution

Thomas Hellmann
Stanford Graduate School of Business ()

The SpiffyTerm, Inc. fictitious case is designed to introduce students to term sheets that are commonly used in venture capital deals. At the time of the procedure, the three founders of the company are concentrating on understanding the term sheet (included in the case) that they just received from a Silicon Valley venture capital company and, taking into account the current financing rounds and future plans, jointly determine what valuation and other conditions to negotiate. The case consists of six sections: 1) basic valuation, 2) valuation with alternative scenarios, 3) consolidation and change of founder, 4) preferred shares, 5) pricing of subsequent rounds and right of first refusal and 6) protection against dilution. The teaching note for this case is a table containing all the formulas that were used to solve the problems.

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