Battle of the Big Law Term Sheet Generators

The Orrick law firm has now made a venture capital term sheet creator available on the web, so I thought I'd take it for a test drive and compare it to the WSGR term sheet generator which has been available for some months now. Good news:  entrepreneurs and investors now have two viable web apps to consult when planning and modeling a preferred stock financing.

Score one quick early round to the WSGR (Wilson) app, simply because it is accessible via Chrome and Firefox. Orrick's works only on Internet Explorer, which meant I couldn't access it at all from my family Mac at home.

But once I dusted off an old Dell laptop, found its powercord and remembered a three year old password, I was able to get onto the Orrick app. It's pretty good. Like the Wilson original, the Orrick term sheet creator takes you step-by-step through a series of fields, with questions, prompts and multiple choices. Inputs include information as straightforward as the company name and the names of the founders and investors, to things more esoteric such as how many S-3 demand registrations you want to offer your investors.

Orrick's app assumes you know more about what you are doing than the Wilson generator does. This is not to say, however, that the Wilson generator is more simplistic. Wilson's provides "tutorials" and links to WSGR market data (with just a few curious omissions), and represents a much better teaching tool. Where you make a choice that is outside industry norms, Wilson's generator is apt to tell you so, and nudge you back to (what it thinks) is the middle of the road. (Example of a text-box pop-up on the Wilson app when you make a questionable turn:  "It is very uncommon for preferred shares to have voting rights that differ from the common shares into which they convert.") Wilson's app comes closer to letting you in on the unwritten rules behind the typical term sheet-building process. Orrick's app is friendlier in the sense that you can get in and out of the app and generate a working draft term sheet faster.

A peeve about the Orrick app:  at the outset, it gives you a drop down menu of all 50 states, plus the District of Columbia, from which to choose the state in which your entity is organized. This might lead you to believe that your choice of state will lead to substantive differences, perhaps in references to corporate codes. But that is not the case. Although I picked Washington for the state of incorporation of my hypothetical company raising funds, the term sheet that was generated referred to my company's charter in brackets, as though it wasn't sure whether Washington corporations refer to charters as "articles" or "certificates" of incorporation. The Wilson generator limits its drop-down menu of states of organization to Delaware, California, or "other," which I've previously found a bit smug; now that design choice seems simply honest.

Wilson's app has more, but Orrick's has some things Wilson's doesn't. Orrick's app gives you a field of questions around whether you want to set up a charitable "entrepreneurs' foundation" at the closing of the round. There is no similar feature in the Wilson generator. Orrick's app also purports to have a track to generate a term sheet for a "founder's round," but on a brief tour this looked to me like an intake form (including fields for names, addresses and social security numbers) that a paralegal might use to set up a file and draft initial documents of incorporation. Not saying this is bad, just that it has more do do with corporate organization than with financing. (It complements the "Start-Up Forms Library" of legal templates that Orrick has made publicly available, concurrently with its term sheet creator app.)

One more thing, and this could be of distinctive benefit to pre-Series A stage startups in particular:  Orrick provides a separate track to generate a convertible note financing term sheet. I have not taken that track for a ride just yet.