It is never too early to be thinking about the terms of your capital raise. In fact, oftentimes an investor will to review your term sheet concurrently with the review of your business plan. A Term Sheet starts this conversation by providing the basics in an upfront manner.
What is a Term Sheet?
A Term Sheet is usually a non-binding agreement that provides an outline of the material terms and conditions of a business agreement. It guides legal counsel in the preparation of a final agreement, and acts more as a template than a detailed legal document.
The contents of each Term Sheet will vary based on the investor and the company’s needs. But typically, it will include some, if not all, of the following information:
- Valuation or Price Per Share
- Liquidation Preferences
- Founder Vesting
- Board Members and Structure
- And more.
Why Do You Need a Term Sheet?
A Term Sheets is often provided by an investor interested in funding you at an earlier stage in your investor search. But sometimes your business will be asked to provide their own document.
Basically, the Term Sheet is meant to provide all parties involved with an understanding of what areas might end up being points of contention if the deal were to be moved to the next level. It is the beginning of a negotiation around the relationship between the investor and the company and can be a great way to gain insight into how the relationship could potentially function.
This document also saves both the investor and the business time if there are irreconcilable differences. Often, it even protects the business searching for financing by providing them with a clear understanding of what they are being offered before taking the relationship to a stage where it is much more difficult to turn back.
Our Term Sheet Services
Although Term Sheets are a smaller document, that does not mean they are one size fits all. As you begin heading into discussions about terms and conditions, the documents will need to be tailored to fit your company and potential investor’s specific needs.
PlanIt Business’ team of experts can assist in this process. Because of our close relationship with a wide variety of funding partners, and our team member’s first hand knowledge of business and finance, we understand the investment process from start to finish. We can create a custom Term Sheet tailored for your needs.
Ready to learn more about our Term Sheet services? Contact us today by calling 800-894-0828 or filling out our online form.