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.
Company Name, a Company incorporated under the laws of State or Jurisdiction of Incorporation. (hereinafter referred to as the "Company")
The security being issued is Type of Security (hereinafter referred to as the “Security”)
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
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.
Sale of the Type of Security (the “Closing”) is anticipated to take place on Closing Date.
The price per share is Price Per Share (the “Purchase Price”).
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%
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%
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.
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.”
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.
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.
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.
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.
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.
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.
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.
The following are the founders of the Company:
(a) Founder 1 Full Name
(b) Founder 2 Full Name (if applicable)
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.
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.
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.
This term sheet shall be governed in all respects by the laws of the Governing Law.
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: