When a venture firm decides it is interested in investing in your company, it will present you with a term sheet, which is essentially an offer letter. This document outlines the proposed terms and conditions of the investment. While a number of the provisions in the term sheet may be “standard” (your experienced venture capital lawyer can tell you which ones) the terms are absolutely negotiable. But as is the case with all negotiations, you will only make progress if you have some leverage.
If you have gotten to this point without a good lawyer, now is the time to hire an experienced one with a background in venture capital financings. A legal advocate will be invaluable in wading through the legal terms and conditions. In addition, a lawyer with venture capital experience will often have experience working both sides of the table, so you can get insight into the thought process from the investor’s perspective.
A term sheet usually outlines the following: