Term Sheet

A Term Sheet is a nonbinding commitment that shows the essential rules and regulations of an investment. The term sheet serves a template and basis of more detailed and legally binding documents. Once the parties who are involved reach an agreement on the details which are laid out in the term sheet, a binding agreement which conforms the term sheet details which are drawn up.

A Term Sheet is an agreement which outlines the basic terms and conditions under which an investment is made. Term sheets which are most often associated with start-ups. Business visionaries discover that the document is vital to pull in investors, for example, venture capitalists (VC) to subsidize their company.

The company valuation, investment amount, percentage stake, voting rights liquidation preference, anti-dilutive provisions, and investor commitment are some items that should be spelled out in the term sheet.

Term Sheets are most often associated with start-ups. Entrepreneurs find this document crucial for investors, often venture capitalists (VC), who may offer capital to fund start-ups.

It is nonbinding.

Company valuations, investment amounts, the percentage of stakes, and anti-dilutive provisions should be spelled out clearly.

Liquidation preference.

Investor commitment.