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Venture Capital
Term Sheet
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Prepared for:
[Investor Name]

Prepared by:
[Company Name]

Venture Capital Term Sheet

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 clause 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 [State]. The detailed terms and conditions of the investment shall be addressed in the contractual terms in a separate contract/agreement.
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Offering Terms

1. Issuer

[Company name], a Company incorporated under the laws of [State]. (hereinafter referred to as the "Company")

2. Security Type

[Series A Preferred Stock] (the “Series A Preferred”)

3. Investors

The following are the list of investors who are looking forward to invest in the Company:
  • [Investor 1 Name]
  • [Investor 2 Name]

4. Investment Amount

  • $[0.00] from [Investor Name] ("Lead Investor")
  • $[0.00] from other investors.

5. Closing Date

Sale of the [Series A Preferred] (the “Closing”) is anticipated to take place on [Date].

6. Price Per Share

The price per share is $[0.00] (the “Purchase Price”).

7. Capitalization

The following table shows the Company's capital structure:
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%

8. Valuation

The Purchase Price represents a fully-diluted pre-money valuation of $[0.00] and a fully-diluted post-money valuation of $[0.00].
Party
Pre-money
Share (%)
Post-money
Share (%)
Founder
$[0.00]
[number]
$[0.00]
[number]
Investor
$[0.00]
[number]
$[0.00]
[number]
Total
$[0.00]
100%
$[0.00]
100%

9. Liquidation Preference

[Series A Preferred] shall have the right to receive [mention the frequency] times the Purchase Price from proceeds on liquidation of the Company. Thereafter, the remaining proceeds (if any) shall be distributed pro-rata to the holders of Common Stock and [Series A Preferred] 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.

10. Conversion

The [Series A Preferred] may be converted at any time, at the option of the holder, into Common Stocks. The initial conversion rate shall be [1:1], subject to adjustment as provided in "Automatic Conversion."

11. Automatic Conversion

Upon the closing of a firmly underwritten public offering of shares of Common Stock of the Company, the [Series A Preferred] shall automatically convert into Common Stock at a per-share price of Series A Preferred Stock not less than [Number of Times] times the Purchase Price and for a total offering of not less than $ [0.00] (a “Qualified IPO”). Any or all of the [Series A Preferred] shall convert into Common Stock, at the then applicable conversion price if the holders of at least a majority of the outstanding Series A Preferred to agree to such conversion.

12. Anti-dilution Provision

In case, the Company issues additional shares at a Purchase Price that is lower than the price paid for the [Series A Preferred] (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.

13. Dividends

The [Series A Preferred] will carry an annual [0.00]% cumulative dividend payable upon liquidation or redemption. For any other dividends or distributions, participation with Common Stock on an as-converted basis.

14. Voting Rights

The [Series A Preferred] 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 [Series A Preferred] 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 Sell.

15. Options and Vesting

All stock and options held by founders, management, and employees shall vest over a [Time Period]-year period. The stock currently held by Founders will be considered to be [0.00]% vested as of the Closing of this financing with the balance to vest in equal monthly installments over [Time Period] years. All others shall vest in equal installments over [Time Period] years with a [Number of Years]-year(s) cliff at the beginning of the vesting term.

16. Drag-Along Rights

Founders, Investors, and [mention the percentage, if any] Stockholders 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.

17. Other Rights and Matters

The [Series A Preferred] 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.

18. Founders

The following are the founders of the Company:
  • [Founder 1 Name]
  • [Founder 2 Name]

19. Board of Directors

At the Initial Closing, the Board shall consist of [number of members] members comprised of:
  • [Name], the representative designated by [Lead Investor name], as the Lead Investor.
  • [Name], the representative designated by the remaining investors.
  • [Name], the representative designated by the Founders.

20. No-Shop Clause

For [number of days], 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.

21. Confidentiality

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 as lead investors, without the written consent of the Investors.

22. Governing Law

This term sheet shall be governed in all respects by the laws of the [State].
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Acceptance and Signature

IN WITNESS THEREOF, the Parties hereto have executed this Term Sheet as on the day and year mentioned above:
[Investor Name]

[Company Name]
Signature
Assign signer 1
Name
Assign signer 1
Date
Assign signer 1
Signature
Assign signer 2
Name
Assign signer 2
Date
Assign signer 2
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THANK YOU

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