casemark/equity-financing-term-sheet

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:

1. Company legal name and incorporation jurisdiction
2. Round metadata — series name, lead investor, raise amount, valuation inputs
3. Pre-financing cap table — common, preferred, options, warrants, convertibles, reserved pool
4. Governance baseline — board size, nominee rights, voting structure
5. Commercial boundaries — liquidation preference cap, anti-dilution type, board control limits
6. 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)

1. Header — non-binding notice, date, parties, round summary
2. Definitions — Binding Provisions, Major Investor, Fully Diluted Capitalization, Registrable Securities, Qualified IPO
3. Economics — security type, OIP, pre/post FD basis, price per share formula
4. Preferred stock rights — dividends, liquidation preference, conversion, anti-dilution
5. Governance — board allocation, observer rights, protective provisions
6. Investor rights — information, inspection, registration (demand/piggyback)
7. Transfer and liquidity — ROFR, co-sale, pro-rata, exceptions
8. Closing mechanics — diligence, required agreements, conditions, timeline
9. Binding provisions — confidentiality, exclusivity, expense reimbursement, governing law, forum
10. 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.