Tim Bray explains the terminology. “Suppose the VC likes the pitch and reads your business plan and likes that too, and you have a couple more talks and it all goes well. The next step would be whats called a Term Sheet; this is an outline, in fairly human-readable terms, of the deal they propose. Ive seen them as short as two pages and as long as fifteen. The key points in the term sheet are the amount they propose to invest, the Valuation, i.e. how much of the company they get for their money, and the Terms, what else they get beyond some shares.”
VCs play a critical role in the innovation process. In my decade-long entrepreneurial career, I’ve talked with various VCs in the past, seen more than a few termsheets, but for various reasons, never ended up raising venture capital. I think its important for entrepreneurs to understand the venture capital process well, especially the fine print.
