The Queensland University of Technology’s Creative Enterprises Australia (CEA) Collider Accelerator has become one of the first tech accelerators to publicly release its term sheet for founders considering the program.
The practice of making term sheets public is far more common internationally than it is in Australia, and CEA’s investment fund manager Shelli Trung is hoping the accelerator’s bold move will start to normalise the process, while also providing more education and experience to young startup founders.
CEA’s decision was fuelled by the experience of the accelerator’s management team and selection of mentors, who Trung says are largely startup founders themselves and understand first-hand the difficulties of negotiating and understanding terms.
“This gives early-stage companies a chance to learn the terms and know what they’re signing before signing up for the accelerator,” Trung told StartupSmart.
“You’re committing 12 weeks to this and you’ll need to give up your full-time job. We don’t want founders to have to quit their jobs to enter our accelerator without having seen the terms.
“It gives startups more lead time to get mentally committed and understand what they mean from a legal standpoint.”
The terms themselves can be found through Collider’s website, and while they include some “protective measures” commonplace in terms offered to young founders, Trung believes they are standard, if not “more generous” than what’s often offered across the industry.
The terms are largely based on the Australian Private Equity and Venture Capital Association’s template draft terms, says Trung.
Considering the precedent CEA is hoping to set with this disclosure, Trung believes that as an ecosystem, Australia can and should be doing more to make founders more confident with investment terms.
“As an angel investor and Australian founder, I would love to see this. Most of our founders have never seen a term sheet, where I went through the process of raising funding with a lot of early-stage founders in New York and Boston where knowledge of term sheets was stock standard,” she says.
“The whole fundraising cycle can be very new and scary, so I would love founders to be able to access term sheets and understand what they mean.
“That means by the time they look at something like an accelerator, they can critically assess the terms and what they mean to them and their startup.”
The accelerator’s decision to publish its terms sheet has been welcomed by other members of the Australian startup community, including BlueChilli chief executive Sebastien Eckersley-Maslin who tweeted on Thursday that BlueChilli also makes its term sheet available.
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— Seb Eckersley-Maslin (@sebeckmas) February 1, 2018