Today, 21 European early-stage VC firms released a standard term sheet they will use as guideline for their future investments (actually they released 2 term sheets – one for “general use” and another designed to facilitate the EIS tax relief for investments in small private companies). Both docs were drafted for the UK market, but the general idea should be the same in most countries. Especially first-time entrepreneurs in Europe without much experience in dealing with investors can benefit greatly from this document. While the terms will still be adjusted as required for each transaction, these general guidelines give entrepreneurs a good idea of what is considered “common practice” in a term sheet. This will also help to reduce legal costs and speed up the whole investment process.

Of course not all start-ups will end up winning. Some might have been able to negotiate more favorable terms if the SeedSummit term sheet had not been published. But the positive effects will surely far outweigh such drawbacks (TechCrunch readers seem to agree – so far almost entirely positive comments). Even with all the information available on the web about term sheets, there are still many entrepreneurs out there who have no clue of what should and should not be included in a term sheet. Even top MBA candidates have this problem, as I observe frequently among my students at IE.

As with most innovation in the European VC sector, this move comes more than a year later than the US Series Seed documents, which were adopted in March 2010 by a group of prominent US seed investors, such as SV Angel (Ron Conway), First Round Capital, Mike Maples, and others. But better late than never!

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