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Term Sheet Venture Capital for the United States

Term Sheet Venture Capital Template for United States

A Venture Capital Term Sheet is a non-binding document that outlines the key terms and conditions of a proposed investment in a company. Under U.S. law, it serves as the foundation for more detailed legal documents and typically includes provisions regarding valuation, investment structure, governance rights, and exit mechanisms. While not legally binding (except for certain provisions like confidentiality), it sets the framework for the final investment documents.

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Term Sheet Venture Capital

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What is a Term Sheet Venture Capital?

The Venture Capital Term Sheet is a crucial preliminary document used when a venture capital firm is preparing to invest in a company. It represents the first formal documentation of the proposed investment terms and conditions. While most provisions in the term sheet are non-binding under U.S. law, they form the basis for negotiation and the preparation of definitive agreements. The document typically covers key aspects such as valuation, investment amount, investor rights, governance provisions, and exit mechanisms. Term Sheets are particularly important in venture capital transactions as they help align expectations and reduce the time and cost of preparing final documentation.

What sections should be included in a Term Sheet Venture Capital?

1. Overview: Key terms summary including investment amount, valuation, and security type

2. Investment Terms: Detailed terms of the investment including price per share and total shares

3. Investor Rights: Rights granted to investors including information rights and board representation

4. Voting Rights: Voting arrangements and protective provisions

5. Exit Rights: Provisions regarding liquidity events and exit scenarios

What sections are optional to include in a Term Sheet Venture Capital?

1. Employee Option Pool: Details of employee stock option pool, to be included when new option pool is being created or modified

2. Anti-dilution Provisions: Protection against future down rounds, included when investors require specific dilution protection

3. Right of First Refusal: Rights to purchase shares before third parties, included when controlling future share transfers is important

What schedules should be included in a Term Sheet Venture Capital?

1. Cap Table: Current and post-investment capitalization table

2. Pro Forma Financials: Financial projections and current financial statements

3. Use of Proceeds: Detailed breakdown of how investment funds will be used

4. Key Employee Agreements: Summary of key employment terms and agreements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Publisher

Ƶ

Cost

Free to use
Clauses






























Industries

Federal Securities Laws: Core federal regulations including Securities Act of 1933, Securities Exchange Act of 1934, Regulation D (Rules 506(b) and 506(c)), Regulation A+, and JOBS Act provisions that govern securities offerings and trading

Blue Sky Laws: State-specific securities laws governing registration requirements, disclosure obligations, and investor qualification standards within each state's jurisdiction

Corporate Law: State-specific corporation laws, particularly Delaware General Corporation Law if incorporated in Delaware, governing corporate formation, operation, and governance

Investment Company Act: 1940 Act regulations including venture capital exemptions and private fund regulations that affect investment vehicle structuring

Tax Regulations: Internal Revenue Code provisions, state tax regulations, and Qualified Small Business Stock (QSBS) requirements under Section 1202 affecting investment structure and returns

Employment Law: Regulations governing stock options, equity compensation, employee rights and benefits in the context of venture capital investments

Intellectual Property Laws: Legal framework for protecting patent rights, trademarks, and trade secrets that may be crucial to the investment's value proposition

Corporate Governance: Regulations including Sarbanes-Oxley Act, board composition requirements, and fiduciary duties that govern company management and oversight

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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