Term Sheet: Here Is Everything Entrepreneurs Must Know When Fundraising by Alejandro Cremades

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  • TL;DR

Knowing how to navigate the elements of a Term Sheet and knowing what general items to look out for can be extremely helpful in shaping the future of the company.

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VC Fundraising, VC Term Sheet elements,

  • Relevant questions addressed

What is outlined in a term sheet?

What elements are the most important ones for a founder? To VC firm?

How to analyze a term sheet after receiving it?

  • Summary bullet points
  • The term sheet is a nonbinding document outlining the major details of an investment
  • It will be extended to a company from an interested investor to whom they have pitched
  • The more at stake, the more detailed a term sheet will be to protect both parties
  • There are standard elements to a term sheet (e.g. parties involved, valuation, assets involved, ownership and voting rights, contingencies for several scenarios)
  • There could be several elements founders should look out for (e.g. debt and convertible terms, request for high level of control, terms on further fundraising, expectations)
  • Founders need to carefully analyze term sheets, as venture investors are sophisticated entities seeking high returns.
  • The term sheet should favor an agreement positive for both parties.
  • Follow-up links

Rule of thumb on ownership dilution https://blog.ycombinator.com/dilution/