Term sheets are, by design, made to be simple. They are supposed to give a general overview of a proposed investment in very broad terms. Despite this, a term sheet can contain provisions that could create complications for your business in the future. An experienced investment lawyer can help you fully understand the implications of all term sheet provisions in order to protect your business from future problems.
The amount to be invested is usually the most important provision of a term sheet. Many investors, especially new investors, get distracted by the overall amount of the proposed investment, which can distract an entrepreneur from other important investment terms. The investment could be contingent on the business being valued above a set amount. It could come in installments. The installments could also be contingent on the business meeting certain goals by certain dates. Business owners must thoroughly understand the terms of any such contingencies and how they could impair the company’s ability to secure the full amount of the proposed investment.