Nevada Term Sheet - Series Seed Preferred Share for Company

• Category: Corporations - Startup - Venture Financing Process
• State: Multi-State
• Control #: US-ENTREP-005-1
• Format: Word; Rich Text

Description

Seed funding typically refers to the first money invested in the company from a source other than the founders. It can also be helpful to think of seed funding as the money invested in the company before it raises its first round of venture capital. The Term Sheet is a nonbinding agreement between an investor and the company, that outlines the broader terms and conditions of an investment deal. Parties frequently use it as a template and starting point for the more detailed and legally binding documents that come later. Once parties agree on the details contained in the Term Sheet, the process moves forward to forming the legal documents that facilitate the investment in the company.

Nevada Term Sheet — Series Seed Preferred Share for Company: A Nevada Term Sheet — Series Seed Preferred Share for Company is a legal document that outlines the key terms and conditions under which an investor will provide funding in exchange for preferred shares in a company based in Nevada. This term sheet serves as a preliminary agreement between the investor and the company before the final investment agreement is drafted. Key Features and Terms: 1. Investment Amount: The term sheet specifies the amount of investment that the investor is willing to provide to the company. This amount is crucial as it determines the ownership stake and the growth opportunities for the company. 2. Valuation: The term sheet states the pre-money valuation of the company, which is the estimated value of the company before the investment. This valuation helps in determining the percentage of ownership the investor will receive in exchange for the investment. 3. Liquidation Preference: The term sheet defines the liquidation preference clause, which outlines the order of payment in case of a company's liquidation or sale. Usually, preferred shareholders receive their investment back before common shareholders, providing them with priority in such scenarios. 4. Dividend Rights: It describes the rights of preferred shareholders to receive dividends before any distribution is made to common shareholders. The term sheet may specify a fixed dividend rate or a participating dividend structure. 5. Conversion Rights: The term sheet outlines the conversion rights of preferred shares into common shares. This provision allows preferred shareholders to convert their shares into common shares in certain situations, such as during an IPO or acquisition. 6. Anti-Dilution Protection: It includes anti-dilution provisions that protect the investor from substantial ownership dilution if future equity financing is raised at a lower price per share than the investor's initial investment. Types of Nevada Term Sheet — Series Seed Preferred Share for Company: 1. Straight Preferred: This type of term sheet offers a fixed dividend rate and does not participate in additional profits beyond the specified rate. It grants the investor preferential treatment in terms of liquidation preferences and dividends. 2. Participating Preferred: This term sheet grants preferred shareholders the right to receive dividends and participate in additional profits beyond their fixed dividend rate along with common shareholders. This structure provides potential for increased returns for the investor. 3. Convertible Preferred: This type of term sheet allows preferred shareholders to convert their shares into common shares, typically upon an IPO or acquisition. This provision gives investors the flexibility to switch their stake in the company based on future events. In conclusion, a Nevada Term Sheet — Series Seed Preferred Share for Company is a legal document that outlines the key terms and conditions of an investment agreement. It is essential for both the company and the investor to clearly define their rights, obligations, and protections before proceeding with a funding round.