Term sheets guide
A term sheet is one of the most important documents a founder will ever encounter.
A term sheet is one of the most important documents a founder will ever encounter. It would direct who gets what financially in the company and who has the right legally, in almost every situation. There are many terms in the term sheet that dictates the “conditions” for any investment entering the company. All these terms would explain the important parts such as the price per share for the investment, the agreed-upon valuation of the company, the economic rights of the new shares, and so on. To be clear, the term sheet is not a legally binding agreement. All it does is act as a blueprint for the formal legal documents that would be eventually drafted by the lawyers. This term sheet would help you raise capital through both equity investments and convertible instruments. The term sheets are normally about two things:
- Control of the company
- Cash received upon an exit event
All these elements are very important to know about and how it affects your company and you. It can be the foundation for the make or break deal for your company. To know more about term sheets and the other legal documents you need for equity investments, check out our blog or knowledge center here. And if you have not yet started using Eqvista as your cap table application, it’s time to do so. Check out our cap table software here & contact us today!