NVCA Term Sheet and Other VC Financing Model Documents

If you went looking for a term sheet and found the NVCA forms, you are in the right place.

It has been about a decade now where almost all venture capital deals made are based on model financing documents provided by the National Venture Capital Association (NVCA), or a derivation of these documents. If you went looking for a term sheet and found the NVCA forms, you are in the right place. So what exactly are the NVCA model documents?


The National Venture Capital Association (NVCA) has been assisting the majority of companies in the U.S. by offering them the right documents for their financing situations. It helps a lot of companies by offering many documents like the NVCA series B term sheet, NVCA series A term sheet, NVCA model convertible note, and so on.

What is NVCA?

The NVCA is an association that empowers next-generation American companies. Their aim is to help these companies fuel the economy of the country. Being the voice of the U.S. startup and venture capital community, NVCA advocates for a public policy that supports and empowers the American entrepreneurial ecosystem.

NVCA works towards helping the venture community as the lead resource for any VC data, networking, peer-led initiatives, and practical education. This is what makes it the dominant trade association in the country. In fact, many other countries have begun to use the NVCA-based documents in their country for their company funding.

Why is NVCA important?

It is clear that the NVCA empowers American companies. This is done by offering them the right financing documents for their funding rounds. Its model venture financing documents are an industry standard for all the USA venture financings. Thanks to their document adoption by many companies, it has significantly reduced the resistance to getting deals closed. And in turn, this has helped many startups in getting the capital that they need to grow.

Pros and Cons of NVCA Legal Documents

Everything has its benefits and disadvantages. Here are the pros and cons of the NVCA term sheet and other model documents:

Pros of the NVCA forms

  • Helps avoid any biased behavior towards the company/entrepreneur or the VC (venture capitalist).
  • Helps exhibit, guide, and establish industry standards
  • Lessens transaction costs and time
  • Presents potential options, by reflecting multiple different financing terms
  • Removes traps for unworkable or unenforceable provisions
  • Includes explanatory commentary where necessary or helpful
  • Offers a comprehensive set of financing documents that are consistent internally for the company

Cons of the NVCA forms

  • Can be very time-consuming and expensive to negotiate and document.
  • Meet five of the issues addressed by the Founder Friendly Standard.
  • Conflict with nine of the issues and are silent on one issue. Nearly all the issues carry long-term ramifications.

NVCA Model Legal Documents

The NVCA model legal documents, such as the NVCA term sheet and others, are the industry-adopted model documents used for all VC (Venture Capital) funding. These NVCA forms reduce the cost and time of financing. And this, in turn, frees the entrepreneur’s time to put their focus on high-level problems.

NVCA Model Legal Documents

Although every company and investment brings its own individual characteristics, it is advised to consult your lawyer before attempting to raise capital. Here are the main 5 NVCA forms, excluding the NVCA term sheet sample (which will be explained later) that you can benefit from:

Note: This list is not limited, and provides only a preliminary overview of the substantive agreements that the NVCA offers. To know more, check their website.

Stock Purchase Agreement (SPA)

One of the NVCA forms is the stock purchase agreement (SPA) document. This is the instrument through which an equity investment is effectuated and agreeable to which investors contribute capital to the company. They do this normally in return for Preferred Stock. The critical terms of an SPA include:

  • the representations and warranties of the company and investor;
  • the number of shares from the Preferred Stock being issued;
  • the purchase price of the Preferred Stock; and
  • any continuing obligations, covenants, or closing conditions.

“Charter” or “Certificate of Incorporation”

When a new class of stock is being created, or the number of authorized shares is being increased, the company’s Certificate of Incorporation will need to be altered to offer for such a change. The Charter is a publicly filed document that, among other things, sets forth the preferences, rights, and privileges associated with the Preferred Stock. It is also one of the most used NVCA forms other than the NVCA model term sheet.

For instance, a Charter may include anti-dilution provisions (protecting investors from future issuance of stock at a lower price per share than at which they purchased), and Preferred Stockholders will often expect what are known as “Protective Provisions” to be incorporated. Protective Provisions require a majority vote of the Preferred Stockholders in order for the company to permissibly carry out certain specified actions, such as authorizing/issuing additional stock or amending the Charter or Bylaws.

Altogether, these provisions allow the Preferred Stockholders to effectively secure their position, and provide assurance that their investment won’t be diluted without their consent.

Investors’ Rights Agreement (IRA)

The Investors’ Rights Agreement (IRA) is another NVCA form that usually sets forth the Registration Rights, Information Rights, and Preemptive Rights of the Preferred Stockholders, among other potential covenants. “Registration Rights” are a contractual right to participate in a public offering of the company’s securities or the right to force the same. “Information Rights” provide the Preferred Stockholders with the privilege to access details related to the company’s financial health. “Preemptive Rights” provided specific investors with a right to purchase shares in a future round to protect their current holdings from dilution.

Voting Agreement

The Voting Agreement is a NVCA model term sheet document that generally provides for:

  • The structure of the board of directors of the company, following the financing round, including the election/removal process
  • Drag-Along Rights – These rights provide that upon certain stipulated approvals, all parties entitled to a vote shall vote in favor of a sale of the company, consent to the terms of the deal, and refrain from exercising any “dissenters’ rights”.

Right of First Refusal and Co-Sale Agreement

As the name suggests, the Right of First Refusal and Co-Sale Agreement normally consists of two primary rights:

  • The Right of First Refusal – This right provides that stockholders (or some subset thereof) have to by law, first offer to sell their shares to the company and/or the Preferred shareholders before the equity can be offered to a third party; and
  • The Co-Sale Right – This is the right to “tag-along” and participate in the negotiated terms of another stockholder’s sale of equity on a proportional basis.

NVCA Term Sheet

The NVCA term sheet template is used by many companies and is one of the main NVCA model documents. The requirements are grouped according to the specific model document in which these provisions might be found. Even though the NVCA term sheet is longer than any other VC term sheet, the basic goal is to offer a level of great detail that will make the term sheet useful as:

  • A roadmap for the document drafters; and
  • A reference for the people in the company to find all the deal terms without the need to go through any legal documents to understand them.

Note: The NVCA term sheet should not be considered as a legal advice document. The NVCA term sheet sample just works as a guide in preparing all the other documents for your funding ventures.

What does the NVCA Term sheet include?

The NVCA term sheet includes all the deal terms that the company will use for preparing its model funding documents. It is not a glossary but does act like one. Its aim is to reduce the overall time spent in drafting such documents and, in turn, respect the efforts everyone, including the investor, puts in. It is important to note that the NVCA term sheet is not a binding agreement and should not be used as one.

Moreover, the term sheet by NVCA is not a commitment to invest in the company. It is modified on the completion of legal review, due diligence, and documentation that satisfies the investors. And the term sheet has to be governed by all the respective laws of the state in which it is used.

Term Sheet Template

NVCA and Aumni have come into partnership and have recently released a new version of the NVCA model term sheet. It has been named the Enhanced Model Term Sheet v2.0., and has many additional parts that have been built upon the original term sheet that was introduced in 2020. Since its launch, it has been the product of the largest investigation of private venture agreement term data to date.

It can be downloaded from here!

Manage your NVCA Legal Documents with Eqvista

Just made a deal and have some documents you want to save and store? Well, Eqvista doesn’t just help you track and manage all the shares in your company, it also helps you with storing your documents on it. So, create a digital copy of your document and use Eqvista to save it. You can also share the document with the respective parties directly from here. Learn more here!

Interested in issuing & managing shares?

If you want to start issuing and managing shares, Try out our Eqvista App, it is free and all online!