Term Sheet Basics for Deep Tech Startups. A chat with Samantha Huang, Principal @ BMW i Ventures

Host: Nicola Marchese Guest: Samantha Huang

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KEY TAKEAWAYS:

1. A term sheet is a non-binding agreement outlining key terms (such as valuation, amount raised, and ESOP pool) between a lead investor and a startup. It is crucial for all founders seeking capital and sets the stage for final legal documents.

2. Founders should negotiate the terms of the term sheet as it will influence the final legal financing documents that govern the startup’s operations and control post-financing.

3. Founders need to be familiar with terms such as valuation, the amount raised, ESOP pool, and dilution. Understanding these terms helps in assessing their impact on ownership and control.

4. Investors may exert control through shareholder-level protective provisions and board-level veto rights. These mechanisms are designed to balance interests and influence major corporate actions.

5. Process and Timeline: After receiving a term sheet, there is usually a 30 to 45-day period for finalizing legal documents. During this time, attorneys work to formalize the terms, and the capital is transferred once the financing phase is complete.

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Disclaimer: This content is provided solely for educational and informational purposes and should not be interpreted as financial or legal advice. Given the complexity and potential impact of these terms, it is crucial to consult with an attorney. Legal expertise is invaluable in navigating these technical aspects and ensuring that the terms are in your best interests before finalizing any agreements.