The goal of our term sheets

We’ve been founders ourselves. We have seen term sheet trends come and go. We have seen best practices emerge – mostly in the USA, which were then imported to Europe. And most importantly, we have witnessed how founders’ motivation crumbled or stood the test of time based on the people and terms they worked with. From our point of view, a few basic truths hold up:

1. All entrepreneurs are driven by a desire to change the status quo: to test their vision of how things should be and how a problem should be addressed.
2. They want to have it their way. They want full operational and decision making independence. If they can learn and profit from advice, all the better. But they will not take orders except for a very sizeable compensation (mostly in the form of growth funding).
3. Most founders are also guided by a sense of fairness which implies that the compensation they receive for the amount of time, effort and risk incurred must be substantial.
4. They have no tolerance for anything boring, be it problems, challenges or people. It’s either fast & furious, or not worth the effort.

We at Beam want to be successful. So we need to be attractive for the best founders.

Beam is here to launch three startups every year. (Read more about our vision and mission in ‘how we work’.) So regardless of what people at our parent company BEUMER Group (BG) think, we base everything on founders’ best interests.

That’s why Beam has two term sheets depending on the kind of business model. Both term sheets are based on our four basic truths and with founders’ long-term motivation as our North star.

Founding team owns >50% of startup after Series A

From our experience and perspective, it’s absolutely essential for your long-term motivation (and hence the success of your startup), that (as a founding team) you own >50% of your company after a Series A funding round.

So Beam will provide you with initial funding and may participate in later rounds. But given the equity stakes, the lion share of funding in follow-on rounds will have to come from other investors, e.g. Venture Capitalists. To give you all the options, we are making sure to not launch with any ‘red flags’ for VCs, e.g.:

1. As outlined above: Early stage investor (Beam) has outsized equity stake (BTW: effectively also a negative signal for founder competence)
2. Any strategic investor has >25% of equity
3. Any strategic investor has a guaranteed board seat
4. Any strategic investor has outsized control or veto rights in shareholder agreement, thereby hindering founders’ operational independence

The power distribution will change

Initially, Beam will provide most of the value whereas the founders add only their skills and effort. But this changes in the long-term. By then, a startup’s founders understand their business much better than anyone at Beam or BEUMER Group. They also have a firmly established industry and customer network. And most importantly, they are the ones integrating employee and customer satisfaction. So only if a successful founding team is still highly motivated years after launch can a business realize its full potential.

Beam is subject to game theory

We do the same thing over and over again: launching startups. If we don’t stick to our agreements, if we don’t honor founders’ best interests, we are done. Without a great reputation, Beam will not be able to attract the best potential founders.