When a venture capitalist tells you he/she willing to put money into your start-up, it is a beginning of another journey. Closing a deal begins with interest of the investors, but there still a long way to go to conclude a deal successfully. The main part of this process is the term sheet. Do you know what it is?
A term sheet is a document outlining conditions and terms of business agreement. After this document is “executed”, it helps a legal officer to prepare a “final agreement”. This document might be either non-binding or non-binding.
A term sheet resembles a letters of intent’ in that they are both introductory non-binding documents that are meant to record intentions of parties to enter into a future agreement based on specific terms.
Within the venture capital financing context, a term sheet usually includes all the conditions of financing a start-up firm. The key terms in such a term sheet include amount to be raised, price per share, liquidation preference, pre-money valuation, anti-dilution provisions, registration rights and liquidation