Term Sheet for Investment
TERM SHEET FOR INVESTMENT TEMPLATE
I. Introduction
This Term Sheet for Investment ("Term Sheet") outlines the preliminary terms and conditions of an investment agreement between [Investor Name], referred to as the "Investor," and [Your Company Name], referred to as the "Company." The purpose of this Template is to establish a framework for further negotiations and the eventual drafting of a comprehensive investment contract. The parties acknowledge that this Template is non-binding except for the provisions outlined under the "Confidentiality" section.
II. Investment Details
A. Investment Amount
The Investor agrees to invest $[INSERT AMOUNT] in cash in [Your Company Name], subject to the terms and conditions outlined herein. The investment shall be made in a single payment upon the execution of the investment agreement.
B. Equity Stake
In consideration for the investment, the Company shall issue a 20% equity stake to the Investor. The exact number of shares and the corresponding rights attached to the equity shall be determined based on the valuation of the Company as detailed below.
C. Valuation
The valuation of the Company for this investment shall be determined by a third-party valuation firm specializing in [Your Industry]. This valuation was determined through a combination of discounted cash flow analysis, market comparables, and future revenue projections. The parties acknowledge that the valuation may be subject to adjustment based on further due diligence or negotiations.
III. Investment Terms
A. Milestones
The investment is contingent upon the achievement of certain milestones as agreed upon by both parties. These milestones may include but are not limited to product development milestones, revenue targets, and customer acquisition goals. Failure to meet these milestones within the specified timeframe may result in the modification or termination of the investment agreement.
B. Vesting Schedule
Any equity issued to the Investor shall be subject to a four-year vesting schedule, with a one-year cliff. This means that the Investor will not be entitled to any equity until the completion of the first year, after which 25% of the equity will vest quarterly.
IV. Rights and Obligations
A. Voting Rights
The Investor shall be entitled to one vote per share held. Major decisions affecting the Company, such as changes to the capital structure or sale of assets, shall require 75% approval from the Investor.
B. Information Rights
The Company agrees to provide quarterly financial reports and updates to the Investor. Additionally, the Investor shall have the right to access relevant information regarding the Company's operations, financials, and strategic plans upon request.
V. Governance
The investment shall not impact the current governance structure of the Company. However, the Investor shall have the right to appoint one representative to the Company's board of directors, subject to the Company's approval.
VI. Exit Strategy
A. Right of First Refusal
If the Investor wishes to sell their equity stake, they shall offer the shares first to the Company before seeking external buyers. The Company shall have 30 days to exercise its right of first refusal.
B. Liquidation Preference
Upon a liquidation event, the Investor shall have the right to receive their initial investment amount plus a 20% annualized return before any distribution is made to other equity holders.
VII. Confidentiality
Both parties agree to maintain the confidentiality of all information shared during the negotiation process and subsequent discussions. This obligation of confidentiality shall survive the termination of this Template.
VIII. Governing Law
The laws of the State of [Your State], United States, will govern and interpret this Template. All disputes related to this Template will be exclusively resolved in the courts of [Your State].
