Equity Financing Term Sheet
equity-financing-term-sheet
Drafts a U.S. venture equity term sheet from deal facts into a negotiation-ready, investor-grade document. Use when counsel or founders need a structured term sheet covering pricing, capitalization, liquidation preferences, anti-dilution, governance, investor protections, transfer/registration rights, and closing mechanics. Trigger: term sheet, equity financing, venture capital, series preferred, pre-money valuation, liquidation preference, pro rata, ROFR, co-sale, registration rights.
SKILL.md
Full skill instructions
Equity Financing Term Sheet
Produces a complete US venture equity term sheet with minimal placeholders and consistency controls for follow-on definitive agreements. Assumes US corporate law (typically Delaware) unless stated otherwise.
Quick Start
Gather before drafting:
- Company legal name and incorporation jurisdiction
- Round metadata — series name, lead investor, raise amount, valuation inputs
- Pre-financing cap table — common, preferred, options, warrants, convertibles, reserved pool
- Governance baseline — board size, nominee rights, voting structure
- Commercial boundaries — liquidation preference cap, anti-dilution type, board control limits
- Existing charter, bylaws, and prior financing agreements
Mark anything unavailable as {{PLACEHOLDER: field name}}.
Core Workflow
1. Intake Validation
Map each input to its output section and flag gaps:
| Input | Drives | If Missing |
|---|---|---|
| Company / jurisdiction | Header, governing law | {{PLACEHOLDER}} |
| Valuation / share price | Economics, ownership math | Flag — draft incomplete |
| Cap table | Dilution impact, conversion basis | Generate skeleton with placeholders |
| Rights matrix | Governance, protections | Insert defaults, mark for review |
| Closing preconditions | Conditions precedent, definitive docs list | List required docs by name |
2. Draft (Hard Section Order)
- Header — non-binding notice, date, parties, round summary
- Definitions — Binding Provisions, Major Investor, Fully Diluted Capitalization, Registrable Securities, Qualified IPO
- Economics — security type, OIP, pre/post FD basis, price per share formula
- Preferred stock rights — dividends, liquidation preference, conversion, anti-dilution
- Governance — board allocation, observer rights, protective provisions
- Investor rights — information, inspection, registration (demand/piggyback)
- Transfer and liquidity — ROFR, co-sale, pro-rata, exceptions
- Closing mechanics — diligence, required agreements, conditions, timeline
- Binding provisions — confidentiality, exclusivity, expense reimbursement, governing law, forum
- Signature block
3. Validation Pass
- Every defined term used consistently across clauses and tables
- All numeric variables resolve or carry explicit
{{PLACEHOLDER}} - Binding vs non-binding sections clearly separated under distinct headings
- Each economic right cross-referenced to its governance and transfer effects
Key Formulas
Price Per Share = Pre-Money Valuation / Pre-Money Fully Diluted Shares
Ownership % (post-close) = Shares Held / Total Post-Financing FD Shares
Liquidation preference:
- Non-participating — greater of preference or as-converted value
- Participating — preference + pro-rata on residuals (state cap if any)
Weighted-average anti-dilution:
Adjusted CP = Old CP × (A + B) / (A + C)
A = FD shares pre-issuance (broad or narrow basis)
B = consideration received / Old CP
C = new shares issued at lower price
Mandatory Clauses Checklist
| Category | Minimum Content |
|---|---|
| Deal Identity | Date, parties, round, amount, currency, pre-money basis |
| Economics | Valuation inputs, conversion ratio, price-per-share formula |
| Preferences | Dividends, liquidation preference, conversion trigger, anti-dilution |
| Governance | Board allocation, observer terms, protective provisions |
| Investor Rights | Information, inspection, registration demand/piggyback |
| Liquidity Controls | ROFR, co-sale, pro-rata, exceptions |
| Closing | Diligence standards, required agreements, conditions, timeline |
| Enforceability | Binding carve-out, non-binding statement, survival, governing law |
Assembly Rules
- Isolate binding clauses (confidentiality, exclusivity, expenses, law/forum) in their own section.
- Use exact thresholds — specific day-counts and percentage figures, not approximations.
- Reference each protection in both its definition and operative clause.
- Include closing conditions and list required definitive documents by name.
- Add termination-and-survival paragraph aligned to transaction stage.
- Attach exhibit placeholders for cap table and schedule of rights.
Pitfalls
- Mixed anti-dilution bases — never combine broad-based and narrow-based results without explicit branch language.
- Incomplete economics — every unresolved economic field must carry a
{{PLACEHOLDER}}marker; never present partial math as final. - Prose-only math — always provide formulas alongside any valuation or ownership narrative.
- Registration promises — never state filing timelines or outcomes without
[VERIFY]flag for counsel confirmation. - Non-US assumptions — default to US law; do not imply foreign corporate law applies unless specified.
- Securities compliance — flag Rule 144 / resale language and federal securities implications with
[VERIFY]before release. - Confidentiality carve-outs — ensure survival terms are compatible with legal and advisor carve-out requirements.
Key changes from original: Removed tags (not in spec), trimmed 10-item prerequisites into 6-item Quick Start, collapsed the verbose intake table and templates into streamlined workflow steps, merged Do/Don't/Jurisdiction sections into a single Pitfalls list, eliminated redundant template blocks (the section order itself serves as the template), and preserved all domain-critical formulas and clause requirements. Reduced from 160 lines to ~100 while retaining full legal coverage.