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Termsheet: Overview and key aspects

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A termsheet is a “non-binding” agreement containing the main terms and conditions of an investment.

The termsheet is the initial document in an investment process that lays the foundation for the final investment agreement and enables alignment between investors and founders.

Basically, the most important aspects of a termsheet are the financial side of the investment and the control of the company.

Financial part

When we talk about the financial side of the investment, the first aspect we think about is of course the valuation of the company, the invested amount and the percentage of the company received by the investor/investors.

Although company valuation is very important, as it is practically the starting point in an investment, as a founder or investor you should not lose sight of the other financial terms that can ultimately influence the outcome of an investment.

Such terms may refer to different rights and obligations of investors or founders, such as:

  • investor preference in case of exit (e.g., in case of an exit, first the investors recover their investment and then, the difference is divided among all shareholders (founders + investors) pro rata to their shares in the company);
  • investor rights in subsequent investments (e.g., investors benefit from an anti-dilution clause in subsequent investments);
  • creation of the employee option pool (e.g., founders and investors determine a number/percentage of shares to be granted to key employees to reward and motivate them to work in the company; usually the option pool shares represent 10% of the company’s share capital and are effectively allocated through a transfer from the founders’ shares to the key employees).

Company control

Apart from the financial side, the termsheet also includes mechanisms to ensure that the investor can control the management of the company and/or have a veto power in important decisions.

For example:

  • investors may have the right to appoint a director in the company;
  • certain decisions can only be made with the investor vote (see more in our article on investment agreements).
The financial part of the investment and aspects of company control should be negotiated and clarified before any other clause in the termsheet.

Other clauses

In addition to the financial and control side, a termsheet contains other clauses that do not have such a large impact on the investment but are nevertheless important. This category includes clauses such as confidentiality, no-shop (i.e., exclusivity), lock-up period, etc.

The confidentiality clause refers to the obligation of the parties not to disclose any information related to the investment.

The no-shop (exclusivity) clause refers to the founders’ obligation not to negotiate with other investors for a certain period. The no-shop (exclusivity) period covers the time needed to conduct the due diligence, negotiate, and close the investment agreement and ensures investors that they will not waste their resources on an investment process that may not be likely to close.

The lock-up period refers to the obligation of the founders or investors not to sell shares in the company for a certain period after completion of the investment.

Non-binding nature of the termsheet

Usually, a termsheet is indicated as being non-binding - i.e., it does not produce binding effects.

But this non-binding nature refers to the fact that signing a termsheet does not guarantee completion of the investment. For example, following the results of the due diligence process, an investor may decide to withdraw from the investment. Or during the negotiation of the investment agreement, founders and investors may not reach a consensus.

However, certain clauses in the termsheet are binding and legally enforceable - for example, the confidentiality clause, the no-shop clause (exclusivity).


Even if signing a termsheet does not guarantee the investment, you should pay close attention to its clauses, as its content determines the final structure of the investment.

How we can help

At Law of Tech we assist you throughout the investment process:

  • we help you in drafting or revising the termsheet and negotiating it;
  • we assist you in the due diligence process;
  • we draft, review and negotiate the investment agreement;
  • we prepare the necessary documents for the Trade Register, register the investment and monitor the process until completion;
  • we help you in the post-investment period to implement all the necessary measures.
Read more about our services here .

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