The term sheet outlines the terms by which an investor will make a financial investment in your company. It includes:
When negotiating a term sheet, consider the investor’s motives and goals, as well as your own.
1. What is the investor trying to achieve?
2. What is the entrepreneur trying to achieve?
Investors can use different methods and tools to make sure that the interests of founders and key management are aligned with the investors’ goals for the corporation:
Throughout the negotiation process, each side rarely achieves all of their objectives. If there is limited capital, then the investor will have the upper hand. If there are competitive term sheets on the table, then the entrepreneur will win important negotiation points.