How to Understand a VC Term Sheet

by wamda, April 3, 2012

Having trouble understanding the ins and outs of the investment process or curious what terms you can expect to see in a standard term sheet?

The MENA Private Equity Association has released a Term Sheet Template, tailored for the MENA region and designed to guide entrepreneurs through the process of signing with investors.

Many venture capital firms may present their own standardized term sheet, so we at Wamda recommend that, rather than take this as a final version, entrepreneurs should understand the terms listed in this version, and set into motion a good governance structure in order to satisfy both the company's and investor's needs. It's critical to surround yourself with good advisors and lawyers who can coach you through this process. 

As a supplement, to further help entrepreneurs understand the investment process, MENA PEA has also released a Venture Capital (VC) Legal Documentation Guide, which guides entrepreneurs the relevant terms and concepts.  

This document discusses the value that investors add to a company, the levels of investment entrepreneurs can expect to raise based on their stage and perceived risk, the stages of investment they will go through, due diligence, valuation, how to structure the investment as well as the company, Shari'a compliance, and a list of the main documents typically needed to conclude the investment process, as well as a glossary of terms and a list of relevant legal teams in the MENA region.

Comments on the usefulness of these documents are welcome! Let us know if you end up using these and if they can be improved.

 
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