Demystifying Term Sheets

The Term Sheet. The pot of gold at the end of the rainbow, the prize that follows hundreds of pitches and endless networking. While this hyperbole may be a bit extreme, to many inexperienced aspiring entrepreneurs the term sheet is viewed with such reverence, and is veiled in about as much mystery. Thankfully, there are a lot of smart, experienced people who have been to the end of the rainbow numerous times and they have shared that knowledge online. Here is an annotated list of some of the best sources of info for demystifying term sheets:

  • The Gold Standard: Brad Feld’s Term Sheet Series is a very thorough series comprising 20 posts on all aspects of term sheets. This is the place to start to get a solid background on the basics.

  • Term Sheet Hacks: Now that you have the basics down it’s time to learn the hacks to get the best deal with your term sheet.

  • Avoiding Term Sheet Problems: Fred Destin has a great two part post on VC terms to avoid. Part One Part Two

  • Negotiate but don’t over-optimize: Now that you’ve learned the hacks and things to avoid, Matt Bartus reminds you not to blow up a deal by trying to tweak and negotiate your term sheet too much. He recommends only choosing three issues to negotiate.

  • Finally, get your hands on some documents: To really get familiar with term sheets it can be useful to actually read one. There are examples of investor documents from Series Seed or from Y Combinator that are being used more and more in angel deals and other seed funding. They are a good place to get a feel for what the documents actually look like.

Whether you are in the process of signing a term sheet, or just want to know more about the process, these articles are a great place to start. Please remember though that every situation is different and that this isn’t legal advice. Be sure to check with your attorney on legal matters such as these.

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