Anatomy of a Term Sheet: Series A Financing

McCarter & English, LLP

A key milestone in the lifecycle of many successful companies (and, admittedly, many unsuccessful companies) is obtaining financing from angel or venture capital investors, but in negotiating with experienced investors entrepreneurs are usually at a distinct disadvantage because they are unfamiliar with standard terms. While we strongly suggest entrepreneurs consult their lawyers rather than negotiate a term sheet mano-a-mano, we know this often doesn’t happen. Our goal in this pamphlet is to give readers the ability to better evaluate these documents themselves by introducing them 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 or someone else) and the company’s stage of development, the universe of possible terms is actually fairly well established. It is therefore possible, with an understanding of these basic terms, to form your own conclusions about a term sheet. For this pamphlet we use as our guide the model Term Sheet available from the National Venture Capital Association (NVCA) website ( because it covers most of the terms you would expect to see in a term sheet for an early stage equity financing and it also includes some helpful annotations. The most recent version of the NVCA Term Sheet is attached to this pamphlet, but you can also download it from the NVCA website.

Please see full Pamphlet below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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