Thu, 23 December 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Not every funded startup continues on the venture path to a high payoff from the sale of the business.
For those startups, investors using an early-exit term sheet can find a path out of the deal.
There are several options for the startup to pay back the investors.
The company can use a revenue share agreement.
While the funds may not be available immediately for payback, the company can pay out of incoming revenue over time.
This is typically 2-3% of top-line revenue and is paid monthly.
In many cases, this will take more than a year to pay off.
Other options include the following:
The purpose of the early-exit term sheet is to provide the investor a path out of the deal.
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