Term Sheet - Seed Investment
A Term Sheet Seed Investment document establishes the general terms of an investor joining your business.
4.6 (24 reviews)
Last updated February 3, 2025
Under 10 minutes
Suitable for Australia
Written by
Edwin Montoya Zorrilla
Reviewed by
Damin Murdock
Document Overview
This Term Sheet is used for early stage startups in the lead up to Seed Round Investment. This document establishes the general terms of an investor coming on board in your business and to make sure each party does their due diligence. It sets out the proposed terms including capitalisation, financing terms like liquidation preferences and anti-dilution, and key provisions to be included in the shareholders and subscription agreements, before you proceed to the full agreement. While the clauses binding the Term Sheet (i.e. confidentiality, exclusivity, enforceability and costs) are legally binding, the negotiated terms are not. This Term Sheet is intended to be used as a precursor agreement to a Shareholders Agreement.
Use this Term Sheet if:
You are preparing for Seed Round investment and would like to set out the negotiated and key terms to an investor to join your business.
Why do I need a Term Sheet?
If you are launching your seed investment round and looking at investors coming on board to join your business (such as an angel investor), a Term Sheet is a great document as a pre-cursor to a Shareholders Agreement. It sets out the negotiated terms and clearly states the intention of both parties to enter into a legally binding agreement in the near future.
What does the Term Sheet cover
- Details of investor
- Investment round details
- Class of shares (preference shares or ordinary shares)
- Number of shares
- Investment amount
- Price per share
- Percentage of equity
- Liquidation preference
- Conversion mechanics
- Anti-dilution
- Dividends provision
- Share cap table
- Timetable to complete agreement
- Key provisions of shareholders and subscription agreements
- Details of board members
- Details of shareholders
- Decisions that need resolutions
- Exclusivity
- Confidentiality
Other documents you may need:
The Legal Risk Score of a Term Sheet - Seed Investment Template
Our legal team have marked this document as low risk considering:
- The document allows the investor a period to conduct further due diligence and potentially withdraw from the transaction, which could leave the company in a position of uncertainty and potential loss of other opportunities during this period.
- The exclusivity clause restricts the company from engaging with other potential investors or entertaining other proposals for a specified timeframe, which might limit the company's opportunities to secure possibly better or more immediate investments.
- The costs clause specifies that the company bears all of the investor’s third-party expenses related to the transaction up to a certain limit, which could result in unforeseen financial burden on the company if these costs exceed initial estimates.
Assuming users have a basic understanding of such agreements, the risks are typical of investment negotiations and can be managed with careful planning and legal guidance.and risk as the efforts of both parties might not result in a secured contract.
Term Sheet - Seed Investment Checklist
Complete your free Term Sheet - Seed Investment with our checklist
Maintain Confidentiality
Adhere to the confidentiality clause by not disclosing the contents of the Term Sheet or the fact of the Proposed Transaction to anyone outside those specified, such as partners, shareholders, directors, employees, and professional advisors who have a need to know.
Observe Exclusivity Period
Respect the exclusivity period by negotiating only with the Investor and not soliciting or responding to other inquiries or offers.
Prepare for Definitive Agreements
Proceed to negotiate and execute the definitive transaction documents, ensuring that all terms agreed upon in the Term Sheet are accurately reflected and legally binding.
Use this Term Sheet if:
You are preparing for Seed Round investment and would like to set out the negotiated and key terms to an investor to join your business.
Why do I need a Term Sheet?
If you are launching your seed investment round and looking at investors coming on board to join your business (such as an angel investor), a Term Sheet is a great document as a pre-cursor to a Shareholders Agreement. It sets out the negotiated terms and clearly states the intention of both parties to enter into a legally binding agreement in the near future.
What does the Term Sheet cover
- Details of investor
- Investment round details
- Class of shares (preference shares or ordinary shares)
- Number of shares
- Investment amount
- Price per share
- Percentage of equity
- Liquidation preference
- Conversion mechanics
- Anti-dilution
- Dividends provision
- Share cap table
- Timetable to complete agreement
- Key provisions of shareholders and subscription agreements
- Details of board members
- Details of shareholders
- Decisions that need resolutions
- Exclusivity
- Confidentiality
Other documents you may need:
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