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 V 
ENTURE
C
 APITAL
101N
OTHING
 V 
ENTURED
,N
OTHING
G
 AINED
© 2008 B
IRCHMERE
 V 
ENTURES
 
 V 
ENTURE
C
 APITAL
103H
OW TO READ
(
 AND UNDERSTAND
)
 A TERM SHEET
 
W
HAT IS A TERM SHEET
?
!
 A letter of intent
!
 An outline of a deal’s terms
!
Summarizes all critical legal and financial terms
!
Quantifies and qualifies the value of the transaction
!
Serves as the basis for drafting formal deal documents and charteramendments
!
Used to build an investment syndicate
!
Not legally binding 
•
Implied duty to negotiate in good faith
•
But almost universally honored as such
•
Reputations are at stake
© 2008 B
IRCHMERE
 V 
ENTURES
 
D
O ANGELS USE TERM SHEETS
?
!
Sometimes, but often not
!
Many angel deals are structured as convertible notes
•
Convert debt at a discount to the first institutional (priced) round
!
 Advantage: avoid mispricing the company early 
•
Mispricing significantly complicates later rounds –high valuations are notalways your friend!
!
Disadvantage: in a hot company the conversion price could besteep
•
Runaway valuations are rare these days
© 2008 B
IRCHMERE
 V 
ENTURES
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