The key terms and conditions of a venture/seed capital investment once agreed are set out on a document known as a term sheet / heads of terms. Term sheets are crucial documents for start-up companies to review and negotiate where possible. Term sheets for seed funding in particular are standardised documents containing a number of boilerplate provisions irrespective of the company involved. Venture capital investments may facilitate more negotiations.

A term sheet is not a binding contract to invest but sets out the broad parameters of a proposed investment. The detailed terms of the investment will be governed by the share subscription agreement, the shareholders agreement and the company’s constitution. Generally, the only legally binding terms in the term sheet are:

• It requires the company and investor to keep the negotiations confidential
• It prevents the company from looking for alternative investors for a period