I got that, that is the 'small business loan' part. I would be amazed if it was charitably paid back 1:1 over time, rather there is going to be some sort of baked in interest rate which will compute what it costs to remove the obligation from the business. Is that 5%? 10%? set by market rates? compounded or simple? What percentage of equity does is represent? Does it participate pro-rata in future financings or does it always convert to cash at that point? That is where the term sheet helps as it lays out that stuff.
Looking at it cynically, it could be a great Goldman Sachs instrument - no exit we win! exit we win! But from a founder perspective, it would be helpful to have a couple of worked examples.
Which is ironic because they say "Like cement, the cultural foundation for new projects and companies sets early."
It seems the financial terms are clear as cement too. I'm really interested in this model for my business (sounds perfect for where we are) but clarity of terms makes me hesitate.
Why would there be a way to remove the obligation of the investment from the business? They are buying shares, once they buy them, they own them until they decide to sell them.
You would strike a deal of how many dollars per share just like any other investment.
The part that a few people in this thread don't seem to be getting is that distributing money via dividends is something a founder wants to do, not something they are forced to do.
Why? Because the founder gets their percentage of the money!
Normal VCs don't want you to distribute because they only want you to grow. Any money that you have they want you to spend on growth so that you can do a big exit. This is a totally different mindset then making a normal company that just earns money and gives that money to it's owners.
Looking at it cynically, it could be a great Goldman Sachs instrument - no exit we win! exit we win! But from a founder perspective, it would be helpful to have a couple of worked examples.