A key milestone in the lifecycle of many successful companies is obtaining financing from angel or venture capital investors. Often, entrepreneurs are less familiar with standard terms than the investors with whom they are working. To help guide them, McCarter partner Benjamin Hron has authored “Anatomy of a Term Sheet,” an introduction to the standard terms in an early-stage equity financing.
Although the specific language in early-stage financing documents can vary considerably depending on, among other things, the investor (angel, VC, etc.) and the company’s stage of development, the universe of possible terms is actually fairly well established. This pamphlet relies on the model Term Sheet available from the National Venture Capital Association (NVCA) website as it covers most of the terms an entrepreneur would expect to see in a term sheet for an early stage equity financing and also includes some helpful annotations.