King Washington Term Sheet for Potential Investment in a Company

Name: King Washington Term Sheet for Potential Investment in a Company
Brand: US Legal Forms
Rating: 4.79 (228 reviews)

Category:

Small Business - Investment or Funding

State:

Multi-State

County:

King

Control #:

US-ENTREP-0046-1

Format:

Instant download

Description

This Term Sheet summarizes the principal terms with respect to a potential private placement of equity securities of a "Company") by a group of investors ("Investors") led by a Venture Fund. This Term Sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation except as provided under "Confidentiality," "Exclusivity", and "Expenses" below. No other legally binding obligation will be created, implied or inferred until a document in final form entitled "Stock Purchase Agreement" is executed and delivered by all parties. Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall exist among them and there shall be no obligations whatsoever based on such things as parol evidence, extended negotiations, "handshakes," oral understandings, courses of conduct (including reliance and changes of position), except as provided under "Confidentiality," "Exclusivity", and "Expenses" below.

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FAQ

A term sheet is a nonbinding agreement outlining the basic terms and conditions under which an investment will be made. Term sheets are most often associated with startups. Entrepreneurs find that this document is crucial to attracting investors, such as venture capitalists (VC) with capital to fund enterprises.

Term sheets typically contain a great deal of important information, set out in three specific sections: Funding. Corporate Governance. Liquidation.

How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.

What to look for in a term sheet Valuation: pre-money valuation vs. post-money valuation.Type of stock: common vs. preferred.Option pool. Option pool - an amount of equity reserved for future hires.Liquidation Preference.Participation rights.Pro-rata rights.Tag-along & drag-along rights.Anti-dilution provision.

A term sheet is an important document that is part of a tentative business deal. It is a summary of the terms and conditions of the tentative agreement. It is generally formatted as bullet points. It should be as detailed as possible so that the parties involved understand the information and are on the same page.

The key clauses of a term sheet can be grouped into four categories; deal economics, investor rights and protection, governance management and control, and exits and liquidity.

List the Offering Terms Closing date and conditions to closing. The issuer of the document (the founder of the startup) Amount of the offering, including the price per share. Investors involved. Securities. Pre-money valuation.

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Investors like to have certainty when investing. One of the potential risks is that you, as the founder, get fed up with the business and decide to walk away.What's a "Term Sheet"? Once you receive a term sheet, you will generally be asked to make a decision and sign the term sheet within 24-48 hours. One stage in the cycle is term sheet negotiation. For any founder, negotiating fair deal terms with an investor is key. It's in no way, shape, or form a promise that the VC will invest in your company. The Term Sheet is important for both the company and investor as it specifies what a company is achieving and what the investor is expecting in return. But remember: in signing this document, you'll be entering into a long professional relationship with the investor.

King Washington Term Sheet for Potential Investment in a Company

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