Term Sheet Form

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A term sheet is an important document that is part of a tentative business deal. It is a summary of the terms and conditions of the tentative agreement. It is generally formatted as bullet points. It should be as detailed as possible so that the parties involved understand the information and are on the same page. Creating a good term sheet could mean that you're able to close the deal faster!

What is a term sheet?

A term sheet is something used in a business agreement. The sheet will outline the terms and conditions of the transaction or deal as proposed by the interested party. A term sheet is usually a preliminary look at a transaction, so it is a non-binding agreement.

This sheet usually uses bullets to identify important points of the business agreement. This bullet-point style is what makes a term sheet differ from a letter of interest. Another differing point is that a term sheet may be used as a proposal, instead of a solid final agreement.  You might send the term sheet to multiple venture capital firms or angel investors who are considering an investment in your company.

When making a term sheet, you should include as much information as possible to make your proposal complete. This will ensure that there is no confusion as to the terms and conditions being offered for the business agreement. A good term sheet will lead to a quicker final transaction.

A term sheet is different from KISS docs, SAFE docs, and convertible debt.

The Purpose of a Term Sheet

A term sheet is intended to outline the terms by which an investor will make a financial investment in a company.  A term sheet outlines the basic terms of a deal to ensure that the parties agree on general terms before beginning the due diligence process.  If you have questions about your term sheet, you should seek legal advice from a law firm that is experienced in corporate transactions.

When should you use a term sheet template?

You should use a term sheet if you are interested in offering parts of your business for purchase and you want to provide general terms of the deal for potential investors to review.

Components of a term sheet template

It is helpful to look at a term sheet example online.  However, a term sheet will generally contain the following elements:

  • Issuer name
  • Nature of Offering (brokered or non-brokered)
  • Type of security (ex: common shares)
  • Offering size
  • Issue price
  • Commission
  • Capitalization
  • Dividends
  • Preferential Liquidation Rights
  • Definition of Liquidation Event
  • Conversion Rights
  • Anti-Dilution
  • Voting Rights
  • Use of Proceeds
  • Closing Conditions
  • Agent
  • Closing date

Sample Term Sheet

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Sample Term Sheet

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