
The term sheet is the foundation of every financing round. It lays the foundation for successful collaboration between founders and investors and protects both sides from misunderstandings later on. But what makes this document so important - and how can it help your startup?
Why is a term sheet crucial?
A term sheet defines the framework conditions of the investment and clarifies key questions from the outset, such as
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- Who receives which shares?
- What co-determination rights do investors have?
- How is the valuation of the company determined?
A clear term sheet is important for founders in order to maintain control over key business decisions and ensure fair evaluation criteria. It creates clear rules and transparency, ensures that all parties involved have the same expectations, minimises misunderstandings and avoids conflicts in the subsequent collaboration. The document thus forms the basis for subsequent contract design, accelerates negotiations and reduces time-consuming coordination processes.
This agreement also sends a strong signal to investors: It shows that your startup is trustworthy and that you and your startup are ready to grow.
What founders should consider
When negotiating a term sheet, make sure that important aspects such as voting rights are included, Liquidation preferences and milestone agreements are regulated in your favour. With a solid foundation, you secure control over your company and at the same time create the basis for fair cooperation with your investors.
Conclusion: A term sheet is more than just a document - it is the basis for the success of your startup.