The Startup Investment Term Sheet is a preliminary document used in Australian startup funding rounds to establish the fundamental terms of a proposed investment. It serves as a roadmap for more detailed legal documentation and is typically used after initial discussions but before due diligence and final binding agreements. While mostly non-binding, it captures essential elements such as investment structure, valuation, investor rights, and governance arrangements, reflecting requirements under Australian corporate law and market practices. This document is particularly crucial in establishing clear expectations between startups seeking capital and potential investors, while ensuring compliance with Australian securities regulations and corporate governance requirements.
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1. Parties: Identification of the company, current shareholders, and investor(s)
2. Background: Brief context about the company, purpose of investment, and current capitalization
3. Definitions: Key terms used throughout the term sheet
4. Investment Terms: Amount of investment, type of securities, price per share, and pre-money valuation
5. Company Capitalization: Pre and post-investment capital structure
6. Investor Rights: Basic rights attached to the investment including voting rights, anti-dilution, and information rights
7. Board Composition: Structure and composition of the board post-investment
8. Pre-emptive Rights: Rights of investors to participate in future funding rounds
9. Exit Provisions: Terms related to company sale, IPO, or other exit events
10. Confidentiality: Obligations regarding the confidentiality of the term sheet and negotiations
11. Binding Terms: Specification of which terms are binding and non-binding
12. Expiration: Validity period of the term sheet
1. Liquidation Preference: Terms for preferential returns to investors in liquidation events, used when offering preferred shares
2. Founder Vesting: Vesting schedule for founder shares, included when founders' equity needs to be tied to continued involvement
3. Employee Share Pool: Details of employee stock option pool, included when establishing or expanding ESOP
4. Drag Along Rights: Rights forcing minority shareholders to join in company sale, used in deals with multiple shareholders
5. Tag Along Rights: Rights allowing minorities to join in share sales, used to protect minority interests
6. Dividend Rights: Terms for dividend payments, included when relevant to investment structure
7. Anti-dilution Protection: Detailed protection against dilution in down rounds, used in more sophisticated investments
8. Right of First Refusal: Rights regarding share transfers, used when transfer restrictions are important
1. Cap Table: Detailed breakdown of current and post-investment shareholding structure
2. Key Terms Summary: Summary of main commercial terms in table format
3. Investor Qualifications: Details of investor accreditation or sophistication status
4. Use of Funds: Proposed allocation of investment proceeds
5. Key Performance Metrics: Current company metrics and projections
6. Material Contracts: List of key contracts and obligations
7. Intellectual Property Schedule: Summary of key IP assets and protection status
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
Healthcare
Biotechnology
Clean Energy
E-commerce
Software as a Service
Manufacturing
Consumer Products
Artificial Intelligence
Fintech
Digital Media
Agriculture Technology
Education Technology
Relevant Teams
Legal
Finance
Executive Leadership
Corporate Development
Investment
Compliance
Board of Directors
Company Secretariat
Strategic Planning
Venture Capital
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Founder
Co-Founder
Investment Manager
Venture Capital Partner
Corporate Lawyer
Investment Director
Board Director
Company Secretary
Legal Counsel
Investment Analyst
Portfolio Manager
Managing Partner
Head of Ventures
Startup Advisory Lead
Private Equity Manager
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