Glossary / Term Sheet
A term sheet is a document that outlines the key terms and conditions of a proposed investment or business transaction. It is typically used in venture capital and private equity deals, mergers and acquisitions, and other types of business agreements. A term sheet serves as a preliminary agreement between the parties involved and provides a framework for negotiating the final terms of the deal. It includes important details such as the purchase price or investment amount, the ownership structure, the rights and obligations of each party, and any conditions or contingencies that must be met. Some common elements found in a term sheet include: 1. Valuation: The agreed-upon value of the company or asset being invested in or acquired. 2. Investment amount: The amount of money being invested or the purchase price of the asset. 3. Ownership and equity structure: The percentage of ownership and equity each party will have in the company or asset. 4. Liquidation preferences: The order in which investors will be paid in the event of a liquidation or sale of the company. 5. Voting rights: The rights and privileges associated with voting on company matters. 6. Board representation: The number of seats on the company's board of directors that each party will have. 7. Anti-dilution provisions: Protections for investors in case the company issues additional shares at a lower price. 8. Conditions precedent: Any conditions or requirements that must be met before the deal can be finalized. 9. Confidentiality and exclusivity: Agreements to keep the terms of the deal confidential and to negotiate exclusively with each other for a certain period of time. 10. Governing law and jurisdiction: The laws and jurisdiction that will govern any disputes arising from the agreement. It's important to note that a term sheet is not legally binding, but it serves as a starting point for negotiations and can be used as a reference when drafting the final legal agreements.