A term sheet is a bullet-point document for startups which lays down the proposed terms and conditions for investment and is only for discussion purposes. A well-structured investment term sheet acts as a base for final Agreements such as Shareholder’s Agreements. A term sheet is considered to be an essential document by the entrepreneurs to attract investors.
Term Sheet assures that parties involved in the business transaction agree on the significant and fundamental aspects of the deal. On the other hand, it minimizes the chance of any misunderstanding and any unnecessary disputes between the parties in future.
Key Elements of Term Sheet
A term sheet mainly includes:
- Details of the company, the current shareholders and the current directors
- The valuation of the company
- Reserved rights of the investors
- Price per share
- Voting rights
- Details of what the invested funds will be used for
- Any restrictions on the activities of the founders
- A summary of the rights relating to the issue and transfer of shares
- Liquidation preference
- Anti-dilution provision
- Exit Rights of the investors
- Option pool
- Information and Inspection rights
- Arbitration clause
- Governing Laws and Jurisdiction clause
- Other essential terms and provisions
Drafting of a venture capital term sheet is simple with LegalWiz.in as it has experienced lawyers who ensure highest customer satisfaction and timely delivery of services. This entire process is managed online, with regular communication and assistance by the professionals available throughout. We have clients in all major cities of India including Mumbai, Delhi, Bangalore, Pune, Ahmedabad, Hyderabad and more as well as our services have equally relevant reach within smaller cities and towns in the country.