Ownership Guillem Laporta, CFA Principal, Ysios Capital Istanbul - PowerPoint PPT Presentation

How to Structure a Term Sheet and Preserve Ownership Guillem Laporta, CFA Principal, Ysios Capital Istanbul October 18, 2019

Disclaimer This presentation has been prepared by YSIOS Capital Partners, S.G.E.I.C., S.A.U. (“YSIOS) . This presentation is only provided for information purposes. This presentation does not constitute a public offer or marketing in accordance with the Spanish legislation in force, neither is part of the legal documentation of the Fund. This presentation does not constitute investment advice, so the recipient of this presentation should form their own assessment and take consequences and risks of doing so in the light of his/her or its personal circumstances. Neither YSIOS nor any third party or entity will accept any liability regarding the accuracy of the information contained in this presentation. The information and/or opinions are subject to change without notice. Ysios Capital 2

03 Deal Flow Decision Process • Market potential 6. Confirmatory Due Diligence • Cash needs 1. Deal Sourcing • Exit strategy Investment Sub-Team Proprietary Network • Meeting with the company Conferences • IP • Interaction with KOLs , FTO Unsolicited • Corporate, legal, labor, tax, and financial statements Fact • Science, clinical, CMC, and Sheet commercial aspects 2. Screening 4. Deal Flow Meetings Core & Expanded Teams Ysios Team • Sector/industry focus Update • Fit within portfolio strategy Note Fact Sheets are discussed as Syndication • Stage of development initial DD continues • Risk/return potential 7. Investment Committee Invest • Round size ment Members of the IC Memo 5. Investment Committee Discussion of the Update Note, which contains the findings of Members of the IC the confirmatory DD 3. Initial Due Diligence (DD) Discussion of the Investment Investment Sub-Team Memo, which includes the Legal • Biological rationale Initial DD and investment thesis docs Syndication • Preclinical/clinical data • Development program Term 8. Investment Closing Sheet • Management team Ysios Capital 3

Term Sheet Term Sheets Are Initial Documents Containing the Main Terms of an Investment TERM SHEET • Outline deal conditions in 10-20 pages • Signed by investor/s and company • Basis for negotiation • Anticipate closing date • Conditions to closing • Non-binding (except for confidentiality and exclusivity) • Basis for legal investment agreements Ysios Capital 4

Term Sheet Most Conditions Relate to Financial and Governance FINANCIAL CONDITIONS GOVERNANCE CONDITIONS • Qualified majorities • • Valuation Board Composition • • Liquidation preference Lead investor • • Tranching Board/Shareholders’ matters • Ratchet Right of 1 st refusal • • ESOP • • Drag along Pay-to-Play • Tag along Ysios Capital 5

Term Sheet Not All Conditions Are Negotiable by Investors FINANCIAL CONDITIONS GOVERNANCE CONDITIONS • Qualified majorities • • Valuation Board Composition • • Liquidation preference Lead investor • • Tranching Board/Shareholders’ matters • Ratchet Right of 1 st refusal • • ESOP • • Drag along Pay-to-Play • Tag along Ysios Capital 6

Term Sheet Ways to Mitigate Financial Dilution • • Valuation ESOP – – Increase (valid reasons: stage, risk, Increase (key personnel needed) comparables, last post-money) – Negotiate vesting and cliff – Step-ups between tranches – Refresh • Liquidation preference • Ratchet – Decrease (valid reasons: not market – Weighted ratchet vs. full ratchet standard, founders not incentivized) – Put a cap based on investor’s multiple – Single dip vs. double dip Ysios Capital 7

Term Sheet Ways to Mitigate Lose of Control • Board Composition – Secure founder representation – Observers – Get to choose independent board members • Board/Shareholder’s matters – Expenses amount – Class voting Ysios Capital 8

Term Sheet Competition Is Key Ysios Capital 9