Sample Venture Capital Term Sheet
I. Overview and Purpose
This Term Sheet outlines the principal terms and conditions proposed for an investment by [Your Company Name] in [Investee Company Name]. The purpose of this Term Sheet is to provide a framework for further negotiations toward a definitive agreement. It serves as a non-binding document except where specified, and is intended to guide the drafting of the final transaction documents.
Both parties are encouraged to review this Term Sheet carefully and consult with legal and financial advisors to ensure that all terms are fully understood and acceptable. The completion of the investment will be subject to due diligence and the approval of both parties’ respective boards of directors.
II. Investment Details
The terms of the proposed investment are as follows:
Investor: [Your Name]
Company: [Your Company Name]
Type of Investment: Equity/Convertible Note (Specify as required)
Amount: $[Investment Amount]
Valuation Cap: $[Valuation Cap] Pre-Money
Discount Rate: [Discount Rate]% (If applicable)
III. Use of Proceeds
The funds provided by this investment shall be used by [Investee Company Name] for the following purposes:
Scaling the product development team
Market expansion activities including marketing and sales
Enhancement of existing infrastructure
Research and development of new products or features
It is agreed that the specified use of funds must closely align with the growth strategies discussed and endorsed by both parties.
IV. Governance
Upon the successful completion of this investment, [Your Company Name] will acquire certain governance rights including but not limited to:
Appointment of [Number of Board Seats] board member(s)
Observation rights to the meetings of the board of directors
Veto rights over specified matters such as additional funding rounds, budget approvals, and key management hires
The specific rights and obligations will be detailed in the definitive agreement to ensure the ongoing alignment of interests between [Your Company Name] and [Investee Company Name].
V. Conditions Precedent
This investment is contingent upon the completion of a satisfactory due diligence process by [Your Company Name]. The following conditions must also be met prior to the closing of the transaction:
Approval of the investment by both parties’ boards of directors
Finalization of all legal and financial audits
Negotiation and execution of definitive transaction documents
Compliance with all relevant regulatory requirements
VI. Confidentiality
Both parties agree to maintain the confidentiality of the terms outlined in this Term Sheet and the negotiations undertaken. Disclosure of these details shall be made only to individuals directly involved in the negotiation process and will require a mutual agreement before any public announcement.
This confidentiality clause will remain in effect regardless of the outcome of the proposed negotiation and subsequent discussions. Any breach of this confidentiality obligation may result in legal actions as stipulated under the governing law clause of the final agreement.
VII. Exclusivity
[Your Company Name] will be granted an exclusivity period of [Number] days during which [Investee Company Name] agrees not to engage in discussions or accept offers regarding equity investment from other parties. This exclusivity aim is to provide both parties sufficient time to conduct due diligence and negotiate the definitive agreements without distractions or competitive offers.
The conditions and duration of this exclusivity period may be subject to negotiations and the specifics will be detailed in the definitive agreement.
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