What Is A Startup Seed Term Sheet?

What Is A Startup Seed Term Sheet?

When a startup company first seeks seed funding from investors, they write a startup seed term sheet that lays out the terms and conditions of the investment. While it is a formal document, it is non-binding and generally sets out in general terms what is expected from each party. It is used during the initial negotiation process as an overview of the what is expected by investors in return for their investment and is used as a basis for the formal contract.

A good startup term sheet will contain conditions that align the interests of both the investors and the founders and, while each company is different, this document usually contains the following:

• Current valuation of the company
• Stock options reserved for employees
• Ownership percentage of different share classes
• How dividends are paid
• Board of directors of the company
• Investor rights