A look at term sheets reveals latest trends in funding

In the venture capital world, the "market" for terms changes constantly. Staying on top of the latest trends and alternatives is an important part of the capital-raising process for entrepreneurs, and a competitive advantage for venture firms.

Valuations across all types of venture deals stayed fairly steady during 2005, after increasing noticeably in the first quarter, with a small increase becoming evident in the second half of the year in second-round and later deals. Participating convertible preferred stock is still the security of choice for venture investments, and will most likely continue to hold that position for the foreseeable future. Over the last year, about half of all venture deals had a cap on the participation feature, giving more of the upside from an exit to the entrepreneurs. Savvy entrepreneurs with good prior track records are usually more successful when negotiating a cap. Overall, the percentage of deals with a cap is increasing.

Heather M. Stone and Sarah N.A. Camougis

Full Story: http://www.bizjournals.com/industries/banking_financial_services/venture_capital/2006/02/20/boston_focus3.html