Fundraising Term Sheet

I. Introduction

This Term Sheet summarizes the principal terms of the proposed fundraising by [Your Company Name], herein referred to as the "Company." This document is intended to serve as a basis for further detailed agreements. It outlines the basic elements necessary for the initial agreement between the Company and potential investors ("Investors").

This Term Sheet does not constitute a legally binding commitment, except for the terms related to no-shop and confidentiality which are binding. By accepting this Term Sheet, the parties agree to negotiate in good faith to finalize the investment agreement.

The key objective of this Term Sheet is to present a clear, concise, and mutually advantageous outline that supports a successful partnership between [Your Company Name] and the Investors.

The specified terms are intended to provide a solid foundation for building a structured financial agreement that will facilitate the development and growth of the Company. The goals of raising funds through this process include scaling operations, enhancing product development, and expanding market reach.

II. Financial Terms

1. Valuation of the Company: Pre-Money Valuation of [$ Amount] and Post-Money Valuation of [$ Amount].

2. Investment Amount: [$ Amount] to be invested by the Investors in exchange for [Percentage]% of equity in the Company.

3. Type of Security: Preferred Stock / Convertible Notes / Common Stock (as agreed upon).

4. Use of Proceeds: Funds will be utilized for the following purposes, detailed in a use of proceeds schedule: product development, marketing, operational costs, and potential acquisitions.

5. Closing Conditions: Completion of due diligence, approval by the Board of Directors of [Your Company Name], and execution of definitive agreements.

6. Milestone Achievements: Specific business milestones tied to funding tranches may be outlined as necessary.

7. Investors' Pro-Rata Rights: Investors shall have the right, but not the obligation, to participate in future equity financings to maintain their percentage ownership.

III. Legal Terms

1. Board Composition: Post-investment, the board will comprise [Number] members, with [Number] designated by the Investors.

2. Liquidation Preferences: In the event of a liquidation or exit, the Investors will receive [specific preferences to be defined here] prior to the distribution of assets to holders of Common Stock.

3. Anti-Dilution Protections: Standard anti-dilution protections will apply, ensuring that Investors’ shareholding is not disproportionately diluted in future funding rounds.

4. Voting Rights: Investors will have standard voting rights on major decisions affecting the Company, as detailed in the voting agreement.

5. Drag-Along and Tag-Along Rights: These rights ensure that minority shareholders must follow the decision of the majority during an acquisition (drag-along) and that they have the right to join a deal if a majority shareholder sells their stake (tag-along).

IV. Confidentiality and Exclusivity

[Your Company Name] and the Investors agree to keep the discussions and terms disclosed during the negotiation process confidential. The specific clauses are as follows:

1. Confidentiality: All negotiations and documents related to this fundraising effort are confidential and must not be disclosed to third parties without prior consent from both the Company and the Investors.

2. Exclusivity: For a period of [Number] months from the date of this Term Sheet, [Your Company Name] agrees not to solicit or engage in discussions with any other potential investors related to the current fundraising objective outlined in this Term Sheet.

V. Closing Terms

Assuming satisfactory completion of due diligence, the parties aim to execute definitive agreements no later than [Date]. All agreements shall be governed by the laws of [Jurisdiction].

Final agreements will be contingent upon the legal and financial verification of all details presented by [Your Company Name] during the due diligence process. This Term Sheet, while outlining the intent of both parties, does not create financial obligations or legal liabilities on either side until final contracts are duly executed.

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Signatories:

By signing below, the Parties indicate their agreement to the terms and conditions of this Term Sheet:

[Your Name]

[Your Company Name]

[Investor Name]

Jurisdiction:

This agreement shall be governed by and construed in accordance with the laws of [Jurisdiction]. Any disputes arising under or in connection with this agreement shall be subject to the exclusive jurisdiction of the courts of [Jurisdiction].

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