A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. It serves as a template and basis for more detailed, legally binding documents. Startups are frequently associated with term sheets. According to entrepreneurs, this document is critical for recruiting investors, such as venture capitalists (VCs), with funds to fund businesses.
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Some items should be spelled out in the term sheet.
- The company valuation
- investment amount
- percentage stake
- voting rights
- liquidation preference
- Dividends
- Conversion to Common Stock
- Founder and Employee Vesting