What information does a venture capital term sheet contain, and can you negotiate the terms?

Protective Provisions. A typical term sheet will include a list of significant actions that can't be done without the venture capitalist's approval. These include issuing stock that has rights or preferences senior or equal to the stock the venture capitalist is buying and selling the company.

The number of directors the venture investors can elect: The venture investors will often want the right to appoint a designated number of directors to the company's Board.

Vesting of the founders' stock: Venture investors may insist that all or a portion of the stock owned or to be owned by the founders and key employees vest (i.e., become "earned") in stages over a period of continued employment with the company.

* Price-based anti-dilution protection in connection with future sales of the company's stock: The venture capital investors will probably ask for some form of price-based anti-dilution protection, such that the price for your company's stock will be reduced if the company does a subsequent financing at a lower price.

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