The Term Sheet: A Startup Thriller Novel

S
tupid technology
. It must be passing through my decryption process right now.

David Alexander pressed refresh for the fiftieth time.

“We’ve spent a lot of time thinking about this deal and it’s a fair offer,” said Doug Kensington. “I know the top line number is not what you might have expected, but that’s what we're prepared to offer. Have you received the email attachment for review yet?”

“I just got it, hold on a minute.” David tapped his foot on the floor and scanned the typical legal prose at the top, desperately looking for the number.

“Can I start going over the terms now? As I said, the top line number is probably disappointing, but let me break down the offer and explain all the sections so that you understand it in detail.”

David’s palms were sweaty, his heart raced, and he had a tight knot in his throat. He felt like he was suffocating in his plain white T-shirt and jeans. This was the first acquisition term sheet he had ever seen. Doug was right, David had no idea what he was looking at, and he didn’t care about all the legalese. He simply wanted to know what was in it for him.

“Remember, this is a non-binding letter that lays out the terms for the closing documents. The only thing that’s legally binding is exclusivity and non-disclosure. The first thing I want to review with you is in section three. We, System Corp, will pay off all outstanding debts with interest. Since you haven’t raised any money yet, you probably don’t have any convertible notes. But if you have any friends’ or family money in the company, we’ll want to deal with that first.”

David thought of Megan for a moment and then saw something in the document that confused him:
What’s a vesting cliff?

“The next thing I want to point out is section four, the vesting period. Five hundred thousand dollars will be granted to you in System stock the day the transaction closes. If you decide to quit within the first year of the transaction, the stock reverts to the company and you don’t get to keep any of it. The nice thing about this structure is that you will make our stock more valuable during your vesting period. You could reap the benefits of this growth as your stock vests.”

What if you fire me 364 days into the acquisition? Do I need a lawyer?

“Should I get a lawyer?” asked David.

“Of course. Review all of this with your lawyer before you make any decisions. But rest assured, I’m not trying to screw you. We have given this offer considerable thought and care. We wanted to make sure we were giving you a strong market offer for your hard work. Let’s talk about section five.”

David gently tugged on his three-inch semi-groomed beard as Doug continued walking through the term sheet. For a document that was supposed to lay out only the high-level aspects of the agreement, it certainly seemed comprehensive. David thought the term sheet would basically be a sheet of paper with an outrageous sum of money written on it. Like in the movies. He never realized how complicated it was to get rich.

This was a six-page document with twelve sections that each had subsections. But System was a big company focused primarily on security solutions, so it made sense they would want to be specific and careful with their words up front. Still, it seemed odd to David that System hadn’t gone public yet. They had ten thousand employees in six countries, and a little over a billion dollars in annual revenue. Most companies that size had gone public much earlier.

“I think I get it, can I mull over the offer and get back to you later today?”

“Of course, let me know when you are ready.”

David hung up the phone not with confidence, but ambivalence. This was what he had dreamed of. Sure, the number was smaller than he had imagined. A lot smaller. But a bird in the hand, right? With nervous energy, he got up and pawed through his vinyl collection. He picked up a Queen album, brushed off some dust, and for a moment thought of playing “We Are the Champions.” He decided against it. He needed some fresh air.

David loved Portland in the fall. It almost made the entire rainy season worth it. Almost. Everything around him seemed to change colors in autumn, save the majestic evergreen pine trees. When he was in middle school, David learned about the oldest living resident of Oregon, a few miles from a small eastern town called Halfway. Some said he was born on the same day as Jesus. But nobody knew for sure; his heart had rotted away long ago. The loner pine lived on one of the steepest parts of one of the most remote mountains in Oregon.

One long weekend while he was still in high school, David drove six hours and hiked for two days to find this tree. The ancient tree was fat and squat and grey, and missing a lot of the green of its youth. It looked like a pair of old dried-up antlers lying on a cliff of white granite and limestone. Yet every year it stubbornly produced pinecones that would fall impotently onto barren rock.

He breathed in the cold air. It was overcast, but he was in denial that summer had ended, so he refused to put on a sweater. A little cold air seemed like a good idea to clear his mind. He set out on a walk that he had made many times before in the urban forest of inner southeast Portland. His chapped lips were dryer than usual.

It was snowing leaves, and David recognized them all. He was a bit of an amateur arborist. The large American elms and Norway maples filled out the autumn landscape with yellow, orange, and red. The ginkgo biloba gave off a spectacular yellow show. Paperbark maples stood like bright red fire engines with dark red splintering bark. The bending birches glowed neon yellow on stark white. The smoke bushes could be found as shrubs or small trees. As they faded through fall, long stalks with fuzzy pink and brown hairs popped out, creating the illusion of a purple smoke.

David walked up and down the diagonal street patterns, through the four rose gardens, and back to the large central traffic circle right outside his place. He had heard it was one of the oldest planned residential neighborhoods in the entire West Coast. The houses all seemed so familiar to him. The bungalow, the Craftsman, the Spanish mission, and the Colonial Revival.

As goose bumps dotted his arms, he started to second-guess his decision to walk in a T-shirt. David’s mind was reeling. On the surface were excitement, confusion, pros and cons lists, and the vague pangs of finally making it. He wanted to call someone and share the news, but he couldn’t decide who. Below the surface of these thoughts was a river of anxiety and a strange emptiness that he could not yet name and hardly realized was even there. It was a hunger that grew inside of him slowly.

Even David’s feet were cold. As he walked with his shoulders rolled up to fight off the chill and his hands pressed deep into his pockets, a black Lincoln Town Car with black tinted windows crawled in front of him. The car came to a halt. An older man with a half-balding head, a baggy black suit and dark-rimmed glasses swung open the back door and stepped out on the sidewalk.

“David Alexander, please come with me.”

David was shocked to hear his name and even more so when the man grabbed his arm. All-out panic broke loose and David’s thoughts of the acquisition instantly disappeared. Although the man seemed to ask politely, there was clearly no choice in the matter. David considered screaming, but it felt like his mouth was full of tinfoil. He tried to run, but his legs felt paralyzed. All he could do was shimmy back and forth like a fish on dry land to try and break free. Before he knew it, he was being dragged into the Town Car.

As he fell back into the seat, his legs reanimated and he kicked wildly. He managed to stick a foot out only to have it smashed by the closing door. A shooting pain went up his leg. The car door swung open again and just as David thought he could finally make a run for it, he was pulled far into the backseat by the back of his shirt. The car sped off.

David felt like they were driving too fast, cutting corners too close, and threatening at any moment to jump a curb and carve through the well-manicured lawns. But maybe it was just the adrenaline. The man in the suit took off his glasses and looked directly into David’s eyes. When most people talk, their eyes wander. Not the man in the suit. In that moment, David thought the man resembled that old stalwart pine tree.

“You have something I need,” he said. “You are going to cooperate and make this easy and I’ll let you get back to your life.”

“Who are you?”

“Shawn Douglas, Secret Service.”

The car looked bigger on the inside. A dark cheap plastic divider hid the driver. The black leather seats showed wear and there were scuff marks on the doors. The heaters were set too high and blew hot air in David’s face. It smelled of dirt and sweat.

David felt flushed.

How did I get into this mess?

S
ix months earlier
, David started the day with a cup of coffee, black. He began the morning ritual with the beans. He made sure they were freshly roasted, never pre-ground. He read somewhere that they lose their notes within minutes of grinding.

His grinding process was an important sub-ritual, starting with the grinder. He preferred burr mills to blade grinders because they produced less heat. For the same reason, ceramic was preferable to metal. He worried about burning out the volatile bean oils. Burr grinders also gave him the best consistency. He was particularly fond of coffee beans from Ethiopia, Kenya or Panama.

Like most days, David decided to use a Chemex filter. Water flowed through the grinds more slowly than a regular filter. David poured carefully boiled water into his sweet Ethiopian grinds. As he waited for the first pour of water to bloom the grinds, he picked up his phone and called Andrew.

“I have a plan so cunning you could pin a tail on it and call it a weasel,” said David.

Many phone calls between David and Andrew started with a Blackadder quote. David hadn’t actually seen an episode of Blackadder, but his best friend quoted it so often that he started doing it himself.

“So what’s the cunning plan this time?” asked Andrew.

The chair squeaked heavily on the turn-of-the-century hardwood floor as David dragged it near the bay window. His small mission-style apartment had a view of lush flowers and green foliage. He continued to pour water carefully into his glass carafe.

“I am going to buy a website that sells jellyfish aquariums. Easy money.”

“David, that’s a terrible idea.”

“This thing will pay for itself in ten months. After that, pure profit.”

“How many people do you know who want jellyfish?” asked Andrew. “How will they find you? What do you even care about jellyfish?”

“That’s not the point. The website has carved out the niche already. The work is done. I just collect royalties.”

“How much does it cost?”

“Twenty thousand.”

“Pennies?”

“Dollars.”

“David, it’s a terrible idea.”

David had put a bid in for the website two weeks ago.

He was obsessed with financial independence. He read so much about passive income that he considered himself an expert on it. Theoretically, anyway. Financial independence was the American dream of the millennial generation: out-source your day job to cheap labor and virtual assistants. Then use your extra free time to create passive income streams by carving out small niches on the Internet.

Niches like jellyfish aquariums.

Eventually (so the theory went) you would only need to work a few hours a week. All goods were drop-shipped, so you didn’t need to hold inventory, the bane of most retail businesses. You checked on the fully automated system and answered a support email or two and everything would work out great.

David thought he had an advantage over most of his generation because he had been a programmer since middle school. His mom bought him his first computer, an Apple Performa 6116CD with 8 MB of RAM. The CD stood for CD-ROM drive, but it might as well have been an abbreviation for “Compelling Distraction,” because that’s what it became the day he discovered the World Wide Web. One morning, before his first class of the day, he snuck into a science room that was home to his school’s newest computers. When he uploaded his first website and saw that anyone could read what he wrote, he was hooked.

David signed up for an online virtual assistant service and wondered what his man in India should do. Then he began to type: Call a few body shops in Portland to get a quote to replace the broken bumper of a white 1991 Toyota Camry.

There. I outsourced.

Two days later he got his response: I called five body shops in Portland and none of them were willing to give me a quote without seeing the car first.

Shit, there goes the grocery money for the week.

It was a few months later that David had the idea for the jellyfish website. He found an auction website that specialized in buying and selling websites. After trolling for a few days, he saw an auction for Jellies-R-Us, which had the world’s most popular blog about jellyfish aquariums with just over two hundred subscribers.

“This is perfect. It’ll only take a few hours a week to support. I already know how to run it because I know how to write code,” David explained to his girlfriend.

“How much will it cost?” asked Megan. She was slender but strong. The pink shorts that announced
Juicy
on her butt showed off her muscle tone.

“Only fifteen thousand dollars.”

“David, it’s a terrible idea,” Megan said as she rolled her eyes. “Come help with the dishes.”

David picked up a plate with last night’s dinner stuck on it and rinsed it with cold running water. Megan hated when he did that.
If you aren’t going to do the dishes right, you shouldn’t even try,
she had told him dozens of times. But his mind was elsewhere.

“No, I am serious. This thing can pay off big for us. It can set us up for a future together. It could pay off our college debts and help my sister.”

“David, you are not allowed to spend our money on half-assed ideas anymore,” she said and then paused for effect. “How’s Heather?”

“Good. Still studying painting. But she hates her new physical therapist.”

David was halfway through his morning cup of coffee when the website auction finally finished. Twenty-eight thousand, five hundred dollars. In the final minutes of the auction, a bidding war nearly doubled the price.

I won!

Shit.

David’s day job was writing code for the inventory maintenance systems at East of Aden, a local high-end boutique furniture store. The pay was okay, and the work wasn’t terrible, but he hated his boss and couldn’t stand most of his coworkers. In the last fourteen months, he had been able to save up $2,339.23 and had agreed with Megan that they wouldn’t touch that money in case of emergencies.

Jellies-R-Us sold only one product: a $15,000 personal aquarium for the at-home enthusiast. It had a built-in black light, which was designed to show off the otherwise translucent jellyfish. The aquariums were shipped from a factory in the UK for about $5,000 each. David stood to make $10,000 in profit per sale. A year ago, the previous owner of Jellies-R-Us was featured on the Today Show where they sold ninety-three aquariums in a single month. But when Google changed its search policies, traffic to the site had slowed dramatically. Even thinking conservatively, David figured he could pay off his credit cards in fifteen months. Surely Megan wouldn’t notice. Plus, he didn’t have to pay interest on his cards for eighteen months, so it was basically free money.

David set his empty cup on the counter. The first piping hot swigs of coffee were always so satisfying, but only if he drank them as hot as he could stand. It would warm him from the inside out.

David picked up the phone and dialed his best friend.

“Andrew, do you happen to know anyone who works for Oprah by chance?”

“No, why?” Even through the phone, David could hear Andrew silently realizing the answer to his question. “You didn’t. Please tell me you didn’t.”

“I did. I got it for a steal too.”

“You can’t keep doing this to yourself, David. Every time you say the same things: financial independence, work for yourself, hate your boss, save your sister. When are you going to grow up? People have to work for a living. There’s no way around it. Your parents worked for a living, my parents worked for a living. You have to work for a living too. Even if you move to Portland like every other millennial, you’d still have to do something. Drive a pedicab for tips. Play trumpet on the corner. Come to think of it, you are a tall, dark, good-looking guy. Good cheekbones. You even pull off that trendy hobo beard look. I’m sure you can get good tips from the women.”

“You’re one to talk. How long have you tried to make it as an investment banker in New York?”

“Not fair. Just because the banking system went to shit does not mean I go spend twenty grand on fish.”

“They’re not fish. They’re jellies. And it was thirty thousand, not twenty.”

“Jesus David, do you have no dignity? You don’t have thirty thousand dollars. Have you told Megan yet?”

“She knows about it.”

“Knows you bought it?”

“I’m going to tell her. This thing will pay for itself, you’ll see. You will all see.”