This document is a checklist for a venture capital term sheet. It addresses each component of a venture capital term sheet and discusses the requirements of each. Among the topics covered are: type of securities to be issued, dividends and distributions, liquidation preference, conversion features, and redemption features.
Washington Venture Capital Term Sheet Guidelines Checklist is a comprehensive document that outlines the key considerations, provisions, and terms to be included in a term sheet for venture capital investments in Washington state. This checklist serves as a guideline to help investors and entrepreneurs navigate the negotiation process and ensure that all crucial aspects are adequately covered. The Washington Venture Capital Term Sheet Guidelines Checklist encompasses various sections, including, but not limited to: 1. Introduction: This section provides an overview of the purpose and scope of the term sheet, highlighting that it is a non-binding agreement used as a framework for future negotiations. 2. Parties: It identifies the names and contact details of the involved parties, including the venture capitalist firm and the entrepreneur or startup seeking funding. 3. Investment Details: This section covers the essential investment parameters, such as the amount of capital to be invested, the form of investment (equity, debt, convertible note), and the anticipated closing date. 4. Valuation: The checklist delves into determining the pre-money valuation of the company, considering its stage, potential, market conditions, and industry comparable. It also establishes the post-money valuation based on the investment amount. 5. Ownership Percentage: Here, guidelines are provided for calculating the ownership percentage that the investor will acquire in exchange for the investment made. 6. Liquidation Preferences: This section addresses the priority of distribution of proceeds in the event of a liquidation or exit, outlining the preferences of both the investor and the entrepreneur. 7. Dividend Rights: Guidelines are provided to determine whether the investor will have a right to receive dividends and, if so, the terms and conditions governing such dividend payments. 8. Anti-Dilution Provisions: This part examines how the term sheet deals with anti-dilution protection for the investor in case of subsequent financing rounds, offering options such as full ratchet or weighted average formulas. 9. Board of Directors: The checklist outlines the composition of the board of directors and the rights and responsibilities of the investor's representative, emphasizing the need for a qualified and independent board. 10. Protective Provisions: This section suggests crucial protective provisions that the investor may require, such as veto rights, information rights, and non-compete clauses, to safeguard their investment and interests. Different types of Washington Venture Capital Term Sheet Guidelines Checklists may exist based on different industries or funding stages. Some additional types may include: 1. Early-stage Venture Capital Term Sheet Guidelines: Designed for startups or entrepreneurs at an early stage seeking angel or seed funding. 2. Late-stage Venture Capital Term Sheet Guidelines: Tailored for companies in later stages of development, aiming for significant funding from venture capital firms. 3. Industry-specific Venture Capital Term Sheet Guidelines: Specific checklists catering to various industries like technology, healthcare, clean energy, etc., considering the unique aspects and risks associated with these sectors. Ultimately, the Washington Venture Capital Term Sheet Guidelines Checklist acts as a reference point for both investors and entrepreneurs, helping them outline the critical terms, provisions, and considerations to be addressed during negotiations, thereby facilitating a more streamlined and efficient funding process.
