From the course: Foundations of Raising Capital
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How term sheets work
From the course: Foundations of Raising Capital
How term sheets work
- When you accept investment, it's not quite as simple as trading a percentage of ownership for cash. Actually, there are quite a few terms that the entrepreneur and investor need to agree upon. All of these deal terms are detailed out in a term sheet, a non-binding agreement that lays out the specifics of an investment deal. Once you agree on a term sheet, a legal binding agreement is drafted to reflect those terms. There are two main concerns for an investor going into any term sheet negotiation: economics and control. Economics refers to the financial return an investor can earn on an investment. Remember that you and your investors generally want the same thing. You want the company to be successful and make you all a lot of money. But that doesn't always happen. So negotiating a term sheet, investors will use a few terms to protect themselves against things not going well. And control terms are mechanisms for…
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