A term sheet is usually short and largely non-binding, so founders are often tempted to sign quickly and leave the details for the lawyers later. In practice, the definitive documents follow the term sheet closely, and it is difficult to renegotiate a key point once it has been agreed in principle. Investors, equally, need terms that protect their investment and are workable in Nigeria.
Economic terms
- Pre-money and post-money valuation, and how the option pool is treated
- Liquidation preferences, whether participating or non-participating, and their multiple
- Anti-dilution protection, such as broad-based weighted average or full ratchet
- Dividend rights
- Conversion of SAFEs and convertible notes
Control terms
- Board composition and observer rights
- Protective provisions and reserved matters requiring investor consent
- Information rights
- Drag-along and tag-along rights
- Founder vesting and leaver provisions
- Pre-emption and pro rata rights in future rounds
Binding provisions
Most term sheets contain some binding provisions, such as exclusivity, confidentiality, costs and governing law. Exclusivity periods in particular deserve attention, as they restrict a company from talking to other investors.
How we assist
- Explaining each term in plain language and its practical effect
- Benchmarking terms against market practice for the stage and sector
- Modelling outcomes with your finance team under different exit scenarios
- Negotiating changes that protect your priorities
- Moving efficiently from term sheet to venture capital documentation and closing
Founder-friendly does not mean investor-hostile
Good terms align founders and investors around the company's success. We help both sides reach terms they can live with for the life of the investment. Where the round uses SAFEs or convertible notes instead of a priced term sheet, we review those instruments with the same care.
