Provide a separate comment for each numbered italicized, underlined and bolded item within the term sheet.

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Who You Are – The lead founder for Flavor Explosion, Inc., a company seeking venture capital investment.
Your Mission – Draft the initial set of suggested changes (e.g. comments) to the attached term sheet, which changes will be forwarded to the VC as well as legal counsel for the VC. Note that you are not expected to draft any actual language to replace the language in the current term sheet – rather, you simply need to describe what changes you would make. You are expected, however, to provide the reasoning behind each decision you make to negotiate or not negotiate a particular provision (e.g. if you were more lenient in one area in hopes of making a more important change in another area, go ahead and point that out). In addition, bear in mind that we are not looking for long, drawn-out soliloquies as to your reasoning behind each change / no-change decision … in certain instances it may well be acceptable to simply state “provision is standard, so left alone,” or “provision not harmful to Flavor Explosion, so no change”, etc.
The Situation – Flavor Explosion, which was launched in September of 2020 by four first-time founders, is on pace to do close to $200,000 in gross revenues for calendar year 2021, and possibly $900,000 in calendar year 2022 if everything breaks right for them. The company’s anticipated “burn rate” over the coming 18 months is approximately $75,000 per month, meaning the company will likely need in the neighborhood of $1,350,000 of fresh capital to cover shortfalls for the next 1.5 years. The company has been meeting with venture capital firms for one month now, and the attached term sheet is the second one they have received. They have not fully reviewed the other term sheet yet, as the $500,000 pre-money valuation in that term sheet caused one founder to use the term sheet as tinder to start a fire in her fireplace (and, in addition, the founders feel like they connected with the investors listed in the attached term sheet more than the others they have met so far). The company has roughly four months of remaining “runway” with the funds it currently has in the bank, after which point, absent new investment, payroll may become a bit tricky. The company believes it is doing reasonably well, although its industry seems to have fallen out of favor of late. A competitor of the company which is a bit further along in its business (tracking for annual revenues of $1.9 million for calendar year 2021, and boasting a management team with superior credentials), just closed a Series A round which, if rumors are to be believed, was consummated at a pre-money valuation of $7.5 million.
Amount of Desired Investment – Flavor Explosion has suggested to the various VCs it has met during the process that it is seeking $12,000,000 in return for issuing equity equal to one-fourth of the company (meaning the company values itself at $36,000,000 on a “pre-money” basis).
The Rules – Only text which is italicized, underlined and bolded is negotiable. You are free to: (i) delete any of this language its entirety; (ii) suggest modifications; or (iii) leave the language as is. If a particular heading or provision is not italicized, underlined and bolded, that provision must be left in the term sheet as drafted.
How to Provide Comments – You are free to hand-write comments on the provided “comment sheet”, or, if you prefer typing to writing, you can create a similar sheet on your computer and type your responses. Please make sure to provide a separate comment for each numbered italicized, underlined and bolded item within the term sheet.
REMEMBER – YOU ARE NOT REQUIRED TO NEGOTIATE EVERYTHING WHICH IS IN BOLD, ITALICS AND UNDERLINED. IN FACT, A NUMBER OF THESE PROVISIONS WOULD, UNDER MOST CIRCUMSTANCES, BEST BE LEFT ALONE. WE ARE FAR MORE INTERESTED IN UNDERSTANDING WHY YOU ELECTED TO CHANGE OR DELETE CERTAIN PROVISIONS WHILE LEAVING OTHER PROVISIONS AS INITIALLY DRAFTED.

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