The Startup Investment Term Sheet is a crucial preliminary document used in the Netherlands when a startup company is seeking to raise capital from investors. It outlines the proposed terms of the investment, including valuation, investment amount, share rights, governance structure, and key investor protections. This document serves as a roadmap for the transaction and forms the basis for the preparation of definitive investment agreements. While mostly non-binding (except for specific provisions), it reflects serious intent from both parties and typically indicates commitment to proceed with the investment subject to due diligence and final documentation. The term sheet must comply with Dutch corporate law and investment regulations, particularly the Dutch Civil Code (Burgerlijk Wetboek) and financial supervision requirements. It's typically used during Series A or later funding rounds, though can also be adapted for seed rounds with institutional investors.
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1. Parties: Identification of the company, current shareholders, and investor(s)
2. Background: Brief description of the company, purpose of investment, and current capitalization
3. Definitions: Key terms used throughout the term sheet
4. Investment Terms: Details of the proposed investment including amount, valuation, and type of shares
5. Share Capital Structure: Post-investment capitalization table and share rights
6. Board Composition: Structure and composition of the board of directors post-investment
7. Voting Rights: Shareholder voting rights and reserved matters requiring investor approval
8. Anti-dilution Protection: Provisions protecting investor's shareholding percentage
9. Transfer Restrictions: Limitations on share transfers including lock-up period
10. Exit Rights: Tag-along, drag-along rights, and IPO provisions
11. Information Rights: Investor's rights to company information and financial reports
12. Confidentiality: Confidentiality obligations regarding the terms and negotiations
13. Exclusivity: Period during which the company cannot seek other investors
14. Closing Conditions: Conditions that must be met before investment completion
1. Founder Commitments: Used when specific commitments from founders are required regarding continued involvement, non-compete, etc.
2. Employee Stock Option Pool: Include when establishing or modifying an ESOP as part of the investment
3. Multiple Closing Provisions: Required for investments with multiple tranches or milestone-based funding
4. Strategic Collaboration: Include when the investor will provide specific strategic value beyond capital
5. Pre-emptive Rights: Rights for existing investors to participate in future funding rounds
6. Registration Rights: Include if US investors are involved or if US IPO is contemplated
7. Intellectual Property Rights: Special provisions regarding IP ownership and protection
8. Environmental, Social and Governance (ESG): Include when investors have specific ESG requirements
1. Capitalization Table: Detailed breakdown of current and post-investment share ownership
2. Key Terms Definition Schedule: Detailed definitions of technical terms used in the term sheet
3. Reserved Matters List: Comprehensive list of decisions requiring investor approval
4. Milestone Schedule: Details of any milestone-based investment tranches
5. Management Rights Letter: Specific rights granted to investors regarding company management
6. Investor Rights Overview: Summary of all rights granted to investors
7. Pro-forma Financial Projections: Company's financial projections post-investment
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