FAQS
What does this preferred stock term sheet mean?
- Financing
- Preferred Stock
A preferred stock term sheet is a non-binding agreement between a company and one or more investors for a company to sell shares of its preferred stock that is consistent with the terms of the term sheet. A term sheet may also include a few binding terms, including confidentiality and a period of investment exclusivity for the investors, often between 30 and 60 calendar days.
While a term sheet does not require an investor(s) to close a financing, it is a substantial step in the process of receiving an equity investment. Once a term sheet is signed, the drafting of the definitive financing documents can begin, followed by a period of negotiation between business and legal counsel of the company and the investor(s). Since the negotiation period prior to closing a financing round is generally both costly and time consuming, most investors will not sign a term sheet unless they intend on closing.
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