"The Term Sheet summarizes the principal terms of the Financing of a Company, in consideration of the time and expense devoted, and to be devoted, by the Investors with respect to the investment. Term Sheets include detailed provisions describing the terms of the preferred stock being issued to investors. Some terms are more serious than others.
The Term Sheet is not a commitment to invest, and is conditioned on the completion of the conditions to closing set forth."
New York Term Sheet
State:
Multi-State
Control #:
US-ENTREP-0055-1
Format:
Word;
Rich Text
Instant download
Description
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How to fill out Term Sheet?
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FAQ
The valuation is one of the most important elements of a term sheet and distinguishes it from similar documents, such as SAFEs, which are used in earlier funding rounds when your company's valuation is not yet known.
But no matter who the investor is, a term sheet will always contain six key components, including: A valuation. An estimate of what a company is worth as an investment opportunity. ... Securities being issued. ... Board rights. ... Investor protections. ... Dealing with shares. ... Miscellaneous provisions.
How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.
Format of Term Sheet Business Information. This section includes the name of the parties involved. ... Security Type. This segment identifies the type of security offered and the price per share of that security. ... Valuation. ... Amount. ... Liquidation Preference. ... Stake in Percentage. ... Voting Rights. ... Miscellaneous.
A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents.
While drafting a term sheet, a few things should be kept in mind like, keeping it simple and clear, knowing your audience, defining the key terms of the agreement, having a scope for flexibility, having set timelines, defining confidentiality and exclusivity clauses, and addressing potential contingencies.
Tips for Writing a Term Sheet Summarize the Conditions. At the beginning of the term sheet, draft a summary that identifies the overall purpose of the agreement and intended outcome. ... State Binding/Non-Binding Terms. ... List the Terms. ... State Timeframes. ... Encourage Feedback.
Once you're certain the investors offering you a term sheet are a good match, go beyond the obvious. Investment dollars and valuation are critical, of course, but don't overlook important details like option pools, liquidation preferences and the composition of your board.