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Venture Capital
Term Sheet

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PREPARED FOR
[Company Name]

 
PREPARED BY
[Lead Investor Name]

Venture Capital Term Sheet

This Venture Capital Term Sheet (hereinafter referred to as “Term Sheet") summarizes the terms concerning an investment (hereinafter referred to as “Investment”) in the company of [Company Name]. These terms do not constitute a contract and are not legally binding upon the parties, except for the clauses of “Confidentiality,” "Governing Law," and "No Shop." This Term Sheet is not a commitment to invest and is conditioned on the completion of the conditions to closing set forth below. This Term Sheet shall be governed in all respects by the laws of [Governing Law]. The detailed terms and conditions of the investment shall be set out in the contractual terms of a separate contract/agreement.

OFFERING TERMS.

1. ISSUER.

[Company Name], a Company incorporated under the laws of [State or Jurisdiction of Incorporation]. (hereinafter referred to as the "Company")

2. SECURITY TYPE.

The security being issued is [Type of Security] (hereinafter referred to as the “Security”)

3. LEAD INVESTORS AND PARTICIPATING INVESTORS.

For the purposes of this Term Sheet, [Lead Investor Name] (referred to as the "Lead Investor") will act as the principal investor leading the investment round, who is responsible for negotiating core terms and generally committing the largest portion of the capital.

Investment in [Company Name] may also include additional investors (collectively, the "Investors"), whose participation is subject to mutual agreement between the Lead Investor and the Company.

All Investors will participate on the terms and conditions as outlined in this Term Sheet.

The following is the list of Investors who are looking forward to investing in the Company:

(a) [Additional Investor 1 Name] 
(b) [Additional  Investor 2 Name] 
(c) [Additional Investor 3 Name]

4. INVESTMENT AMOUNT.

The total capital being invested in the Company is as follows:

(a) Lead Investment: [Lead Investor Investment Amount] from [Lead Investor Name] (the "Lead Investor")

(b) Additional Investments: [Aggregate Investment Amount] from the remaining investors.

5. CLOSING DATE.

Sale of the [Type of Security] (the “Closing”) is anticipated to take place on [Closing Date].

6. PRICE PER SHARE.

The price per share is [Price Per Share] (the “Purchase Price”).

7. CAPITALIZATION.

The following capitalization table provides a snapshot of the Company’s ownership structure, detailing the allocation of Common Stock, Stock Options, and Series A Preferred shares among key stakeholders, along with their respective total shareholdings and percentage ownership.

Name	Common Stock	Stock Options	Series A Preferred	Total Shares
[Founder 1]	[Number]	[Number]	[Number]	[Number]
[Founder 2]	[Number]	[Number]	[Number]	[Number]
[Investor 1]	[Number]	[Number]	[Number]	[Number]
[Investor 2]	[Number]	[Number]	[Number]	[Number]
[Employee 1]	[Number]	[Number]	[Number]	[Number]
[Employee 2]	[Number]	[Number]	[Number]	[Number]
[Remaining Option Pool]	[Number]	[Number]	[Number]	[Number]
Total	[Number]	[Number]	[Number]	[Number]
Percent Ownership	[Percentage]	[Percentage]	[Percentage]	100%

8. VALUATION.

The Purchase Price reflects a fully diluted pre-money valuation of [Pre-Money Valuation] and a fully diluted post-money valuation of [Post-Money Valuation].

Party	Pre-money	Ownership Percentage	Post-money	Ownership Percentage
Founder	$[Founders’ Aggregate Valuation]	[Percentage]	$[Founders’ Post-Money Valuation]	[Founder Ownership]%
Investor	$[Investors’ Aggregate Valuation]	[Percentage]	$[Investors’ Post-Money Valuation]	[Investors Ownership]%
Total	$[Total Pre-Money Valuation]	100%	$[Total Post-Money Valuation]	100%

9. LIQUIDATION PREFERENCE.

[Type of Preferred Security] shall have the right to receive [Liquidation Multiple] times the purchase price from the proceeds of the liquidation of the Company. Thereafter, the remaining proceeds (if any) shall be distributed pro rata to the holders of Common Stock and [Type of Preferred Security] on a common equivalent basis. A sale of all or substantially all of the Company’s assets, an acquisition, winding up, a merger, or other disposition of the Company (collectively, a “Company Sale”) will be treated as a liquidation.

10. CONVERSION.

The [Type of Preferred Security] may be converted at any time, at the option of the holder, into Common Stocks. The initial conversion ratio shall be [Initial Conversion Ratio] share(s) of Common Stock for each share of [Type of Preferred Security], subject to adjustment as provided under “Automatic Conversion.”

11. AUTOMATIC CONVERSION.

Upon the closing of a firmly underwritten public offering of shares of Common Stock of the Company, the [Type of Preferred Security] shall automatically convert into Common Stock at a per-share price of Series A Preferred Stock not less than [Minimum IPO Price Multiple] times the Purchase Price and for a total offering of not less than [Qualified IPO Threshold] (a “Qualified IPO”). 

Any or all of the [Type of Preferred Security] shall convert into Common Stock at the then-applicable conversion price if the holders of at least a majority of the outstanding [Type of Preferred Security] agree to such conversion.

12. ANTI-DILUTION PROVISION.

In case the Company issues additional shares at a Purchase Price that is lower than the price paid for the [Type of Preferred Security] (or their conversion price), then the Investors shall be entitled to anti-dilution protection in accordance with a broad-based weighted average formula. In such an event, the Company shall be bound to cooperate with the Investors, and the Company shall take all necessary steps to issue additional shares to the Investors.

13. DIVIDENDS.

The [Type of Preferred Security] will carry an annual [Cumulative Dividend Rate in Percentage] cumulative dividend payable upon liquidation or redemption. For any other dividends or distributions, participation with Common Stock on an as-converted basis.

14. VOTING RIGHTS.

The [Type of Preferred Security] shall vote together with the Common Stock on an as-converted basis and not as a separate class, except as specifically noted herein or required by law.

Approval of the majority of the then-outstanding [Type of Preferred Security] will be required to:

(i) change rights, preferences, or privileges of the Preferred Stock; 
(ii) change the authorized number of shares; 
(iii) redeem or repurchase any shares; 
(iv) declare or pay any dividend; 
(vi) change the authorized number of directors; or 
(vii) liquidate or dissolve, involving a Company sale.

15. OPTIONS AND VESTING.

All stock and options held by founders, management, and employees shall vest over a [Standard Vesting Period in Years] year(s) period. The stock currently held by Founders will be considered [Founder Initial Vested Percentage] vested as of the Closing of this financing, with the balance vesting in equal monthly installments over [Founder Vesting Period in Years] year(s). All others shall vest in equal installments over [Employee Vesting Period in Years] year(s) with a [Cliff Period in Years] year(s) cliff at the beginning of the vesting term.

16. DRAG-ALONG RIGHTS.

Founders, Investors, and [Percentage of Stockholders] stockholders are required to vote for a Company Sale approved by (i) the Board, (ii) a majority of Series A Preferred, (iii) a majority of Common Stock (excluding shares of Common Stock issuable or issued upon conversion of the Preferred Stock) (collectively the "Common Majority"), subject to standard exceptions.

17. OTHER RIGHTS AND MATTERS.

The [Type of Security] stock will have standard broad-based weighted-average anti-dilution rights, first-refusal and co-sale rights over founder stock transfers, registration rights, pro rata rights, and information rights.
 
18. FOUNDERS.

The following are the founders of the Company:

(a) [Founder 1 Full Name] 

(b) [Founder 2 Name] (if applicable)

19. BOARD OF DIRECTORS.

At the Initial Closing, the Board shall consist of [Number of Board Members] members, including:

(a) [Lead Investor Representative Name], the representative designated by [Lead Investor Name], serving as the Lead Investor.

(b) [Other Investors Representative Name], the representative designated by the remaining investors.

(c) [Founders Representative Name], the representative designated by the Founders.

20. NO-SHOP CLAUSE.

For [No-Shop Period in Days] day(s), the Company will not solicit, initiate, encourage, or accept any offers, proposals, or negotiations for the acquisition of Company capital Stock (other than equity compensation for service providers), or of all or any substantial portion of Company assets.

21. CONFIDENTIALITY.

The Company will not disclose the terms of this Term Sheet to any person other than members of the Board of Directors, the Company's accountants and attorneys, and other potential investors acceptable to the Company as lead investors without the written consent of the Investors.

22. GOVERNING LAW.

This term sheet shall be governed in all respects by the laws of the [Governing Law].

ACCEPTANCE AND SIGNATURE.

IN WITNESS WHEREOF, the Parties hereto have executed this Term Sheet as on the day and year mentioned above:

[Company Name] 

[Lead Investor Name] 

Name: 

Name: 

Signature:

Signature:

Date:

Date:

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