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Term Sheet

An investment term sheet works like a bridge between investors and entrepreneurs. Equally important from both sides, Term Sheets hold the power of initiating and completing investment transactions and help StartUps grow!
Nowadays, all Investors and Founders draft investment term sheets to strengthen their negotiation rounds. So, as a young entrepreneur today, it is important to understand what a Term Sheet is.

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    INTRODUCTION

    WHAT IS A TERM SHEET?

    A Term Sheet is a legal agreement that sets out the basic terms and conditions of a proposed investment transaction. Not legally binding, a term sheet provides the founders and investors of a company an equal chance of presenting their views regarding a future investment to be made.

    As a fact, Term Sheet is not legally binding upon any of its parties. However, the Term Sheet is backed by certain legally binding agreements that define the complete process of a particular investment transaction. One such document is the Shareholder and Share Subscription Agreements (SSSHA).

    BENEFITS OF AN INVESTMENT TERM SHEET

    It is quite fascinating how a legally non-binding agreement can become such a fundamental document for fundraising. There are multiple benefits of having an investment term sheet, such as:

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    KEY CONSIDERATIONS OF A TERM SHEET

    An investment term sheet includes all major points of discussion between Investors like Venture Capitalist, Angel Investors etcetera and Founders about the relationship, roles, and duties post investment. Hence, it is very important to cover certain points in an investment term sheet without fail, few of them are:

    Leave your confusions aside and invest in healthy negotiating points with investors, get your Investment Term Sheet drafted with Experts at Legalwiz.in.
    Reach Us at Support@LegalWiz.in or 1-800-313-4151
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    Why Choose LegalWiz.in?

    We are a legal tech online service provider. Being a StartUp and having a team filled with experienced lawyers and company secretaries, we understand the importance of raising funds and how complex the process can turn out to be. However, if you choose Legalwiz.in to get your investment term sheet, we can turn this complex process into a simple, easy, and cost-effective process.

    FAQs

    Frequently Asked Questions

    2022-09-19T11:19:44+00:00

    If you are getting an investment from a fully functioning venture capital firm there are high chances that they will provide you with the term sheet. However, if you are dealing with an investor or more accurately an angel investor, who isn’t much aware of the functioning of laws, they might ask you as a company to prepare the investment term sheet. It is legally acceptable for any of the parties to draft a term sheet. 

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    No, a venture capital term sheet is just a basic document that covers the major provisions of StartUp investment. Hence, it is usually not legally binding. However, all other agreements arising from and being entered into after the negotiations from the term sheet are completely binding such as the ShareHolders’ Agreement, or any employment contract – will be legally binding on all its parties.

    2022-09-19T11:20:26+00:00

    No, the term sheet is not at all mandatory under the laws of India. However, it works like a planner or a guide which makes the process of completing an investment round very flexible and easy. Hence, it is always advisable to have an investment term sheet before raising any funds from a third-party investor. 

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    This is completely dependent upon the rounds of negotiations between the business owners and investors. It can be completed in one or two weeks and can last months. A major factor involved is how the interests and conditions of both parties are protected in the term sheet. If you have a term sheet that focuses on safeguarding the rights of all persons involved, the negotiation rounds won’t take much longer. 

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    Once a Term Sheet is discussed and finalized, the parties enter a valid and legally binding agreement that governs the investment transaction. This legally binding agreement is also known as the SSSHA. Once the SSSHA comes into effect, the term sheet automatically dissolves. 

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