• 9414883452
  • contact@submitreturn.com

Term Sheet

 

An investment term sheet serves as a crucial bridge between investors and entrepreneurs. It plays an essential role for both parties by laying the foundation for investment deals and enabling startups to secure funding and scale their growth. Today, term sheets are a standard part of negotiations between investors and founders, helping define the key terms and expectations early in the process. As a modern entrepreneur, understanding what a term sheet is—and how it works—is vital for navigating funding rounds effectively.

Get Expert Assistance

10,000+

Businesses Served

4.7/5

Google Review

100%

Satisfaction Guaranteed

INTRODUCTION

WHAT IS A TERM SHEET?

A Term Sheet is a preliminary legal document that outlines the key terms and conditions of a proposed investment deal. Though not legally binding, it serves as the foundation for future negotiations between the founders and investors, giving both parties a fair platform to express their expectations and requirements.

While the Term Sheet itself doesn’t impose legal obligations, it acts as a critical blueprint for drafting binding agreements that follow. The actual legal enforceability comes into play through documents like the Shareholders’ Agreement and the Share Subscription Agreement (SSSHA), which detail the rights, obligations, and processes associated with the investment.

BENEFITS OF AN INVESTMENT TERM SHEET

It is quite fascinating how a legally non-binding agreement can become such a fundamental document for fundraising. There are multiple benefits of having an investment term sheet, such as:

Outlines terms for investment transactions

All StartUp owners can agree on the fact that investment transactions tend to get lengthy and tedious sometimes. So, when Companies and Investors have access to one sheet which has all the basic important details of proposed investment transaction, it gives them a chance to relax.
 

Minimizes the probabilities of a dispute

Even though an investment term sheet has a non-binding effect, it covers all the essential aspects of an investment round. These aspects are also then negotiated between all the parties with their legal team by their sides to finalize the Investment round.
 

Helpful in Negotiation rounds

When parties are given the opportunity to negotiate before entering into a contract, both the business owner and the investor can take necessary steps to protect their best interests. This process allows them to review, adjust, and mutually agree on the terms, ensuring that the final agreement reflects a fair and well-considered understanding before it is signed.

Non-Binding effect

One of the key advantages of an investment term sheet is that it provides a platform to address and agree upon all critical aspects of a fundraising deal before any legal obligations are imposed. By allowing both parties to present their views and negotiate terms early on, the term sheet helps save significant time, cost, and effort throughout the investment process.

Learn more about Term Sheet

KEY CONSIDERATIONS OF A TERM SHEET

An investment term sheet includes all major points of discussion between Investors like Venture Capitalist, Angel Investors etcetera and Founders about the relationship, roles, and duties post investment. Hence, it is very important to cover certain points in an investment term sheet without fail, few of them are:

Details of all parties

To establish clear rights and responsibilities, it is essential to identify all parties involved in the transaction. Therefore, a term sheet should explicitly state the names and roles of the promoters, founders, or directors, as well as the identity of the investor. This clarity ensures transparency and prevents confusion during negotiations and execution.

Details of Proposed Transaction

This section of the term sheet outlines the fundamental details of the investment transaction. It typically includes the company’s valuation, the amount to be invested, the shareholding structure post-investment, and provisions like anti-dilution rights. These elements form the financial foundation of the deal and guide further negotiations.

Non-Binding effect

A term sheet should clearly state the extent to which its provisions are binding on the parties. While most of its contents are non-binding, it’s important to clarify that the term sheet is not intended to create any legal obligations. Instead, it serves as a preliminary document that outlines key rights and responsibilities to guide the parties before entering into a formal agreement.

Liquidation Preference

This means a term sheet should also specify how the proceeds will be distributed between the investors and promoters in the event of a liquidation. Clearly outlining the liquidation preference helps avoid future disputes and ensures all parties understand their financial rights in case the company is sold or wound up.

Board of Directors

A venture capital term sheet should clearly define the composition of the Board of Directors (BoD), including details such as quorum requirements and voting rights. Additionally, in specific business matters, the investor may be granted affirmative voting rights, allowing them to approve or veto key decisions to safeguard their interests.

Share transfer

Any restrictions on the transfer of shares should be clearly outlined in the investment term sheet. This includes clauses such as lock-in periods, right of first refusal (ROFR), tag-along or drag-along rights, ensuring all parties are aware of and agree to the limitations on share transfers.

Exit Options

This clause gives investors the option to exit their investment after a specified period. The exit options are mutually agreed upon by the parties based on their preferences.

With these factors in mind, a well-crafted investment term sheet can provide significant benefits to investors, the startup or business, and its founders alike.

Need assistance? Don’t worry, experts are here to help!

Call us at: 9414883452  or Email us  : contact@submitreturn.com

Simpler. Quicker. Better.

Why Choose submitreturn.com  ?

We are a legal tech online service provider. Being a StartUp and having a team filled with experienced lawyers and company secretaries, we understand the importance of raising funds and how complex the process can turn out to be. However, if you choose submitreturn.com to get your investment term sheet, we can turn this complex process into a simple, easy, and cost-effective process.

FAQs

Frequently Asked Questions

If you are getting an investment from a fully functioning venture capital firm there are high chances that they will provide you with the term sheet. However, if you are dealing with an investor or more accurately an angel investor, who isn’t much aware of the functioning of laws, they might ask you as a company to prepare the investment term sheet. It is legally acceptable for any of the parties to draft a term sheet. 

No, a venture capital term sheet is just a basic document that covers the major provisions of StartUp investment. Hence, it is usually not legally binding. However, all other agreements arising from and being entered into after the negotiations from the term sheet are completely binding such as the ShareHolders’ Agreement, or any employment contract – will be legally binding on all its parties.

No, the term sheet is not at all mandatory under the laws of India. However, it works like a planner or a guide which makes the process of completing an investment round very flexible and easy. Hence, it is always advisable to have an investment term sheet before raising any funds from a third-party investor. 
This is completely dependent upon the rounds of negotiations between the business owners and investors. It can be completed in one or two weeks and can last months. A major factor involved is how the interests and conditions of both parties are protected in the term sheet. If you have a term sheet that focuses on safeguarding the rights of all persons involved, the negotiation rounds won’t take much longer. 
Once a Term Sheet is discussed and finalized, the parties enter a valid and legally binding agreement that governs the investment transaction. This legally binding agreement is also known as the SSSHA. Once the SSSHA comes into effect, the term sheet automatically dissolves. 
More Questions? Seek Help of an Expert
9414883452
9414883452
contact@submitreturn.com
HAPPY CUSTOMERS

We take pride! Not in our work, but in your words.

Highly Recommended. Good Service
MANINDER Kaur March, 2025
I am very much satisfied with their service for INC 20 A. i will recommend them and definitely will keep in mind for any other service.
MANINDER KaurMarch, 2025
excellent, i appreciate accountability and transparency in the process
Aditya Bansal March, 2025
submitreturn.com is doing its best to give good service to clients.
Sunil Chauhan March, 2025
Recently got Trade Mark registered
Devendra Dkl March, 2025
It was an amazing experience from the support team. Thank you...
Aswin M March, 2025
Had a Seamless Experience in registering for GST. Been associated with them for 5 yrs now, and have done several LLP and GST registrations. Happy with their service, so i keep coming back
Mr Karthik February, 2025
Professionally filed my application. thanks
Amit Sagar January, 2025
Had a great experience from the start till completion superb & very supportive team
Vikrant Sayyed January, 2025
Read all testimonials

Term Sheet

Start your legal drafting services through 100% online process.

Get Started
9414883452
9414883452
contact@submitreturn.com
Facebook Twitter Youtube Youtube Youtube

POPULAR SERVICES

  • Private Limited Company Registration
  • One Person Company Registration
  • LLP Registration
  • Partnership Firm Registration
  • Sole Proprietorship Firm Registration
  • GST Return Filing
  • Trademark Registration
  • Accounting and Bookkeeping
  • Explore all services »

COMPANY

  • About us
  • Blog
  • Webinars
  • Careers
  • Partner with us
  • Contact us
  • Media
  • Sitemap
  • Partner Services

TERMS AND POLICIES

  • Privacy Policy
  • Terms & Conditions
  • Satisfaction Guarantee