2.2 KiB
2.2 KiB
Section 15 | Lesson 81 - Important Investment, Great Marketing
notes
term sheet
- non binding
- basic terms
- you can do it for free
chat explanation
Purpose
- Non-binding summary of key terms before drafting full legal contracts.
- Serves as a blueprint for the final agreement.
Common Use Cases
- Startup investments (VC/angel funding)
- Mergers and acquisitions (M&A)
- Partnerships and joint ventures
- Large financing deals
- Real estate or major service agreements
Key Sections in a Term Sheet
Valuation & Investment
- Company valuation
- Amount to be invested
- Price per share / equity percentage
Rights & Governance
- Board seats
- Voting rights
- Investor protections or veto rights
Founder & Team Provisions
- Vesting schedule
- Roles and responsibilities
- Restrictions (e.g., non-compete, full-time requirement)
Financial Terms
- Liquidation preference
- Dividends (if any)
- Anti-dilution protections
Exit & Transfer Terms
- Rules for selling the company
- Buyout scenarios
- Rights of first refusal / co-sale rights
Legal & Administrative Terms
- Closing conditions
- Due diligence requirements
- Timelines for completing the deal
Binding vs Non-Binding
- Most of the document is non-binding
-
Binding parts typically include:
- Confidentiality
- Exclusivity / no-shop clause
- Dispute resolution
Why a Term Sheet Matters
- Aligns expectations early
- Reduces legal costs
- Prevents misunderstandings
- Speeds up negotiation and contract drafting
minimal structure for a term sheet
- Parties
- Purpose of agreement
- Investment amount / contribution
- Ownership or percentage rights
- Governance (decision-making, voting)
- Financial terms (profit split, dividends)
- Restrictions (non-compete, full time, IP ownership)
- Exit terms (what happens if someone leaves)
- Timeline / closing conditions
- Binding clauses (confidentiality, exclusivity)