editione1.0.2
Updated August 29, 2023You’re reading an excerpt of Angel Investing: Start to Finish, a book by Joe Wallin and Pete Baltaxe. It is the most comprehensive practical and legal guide available, written to help investors and entrepreneurs avoid making expensive mistakes. Purchase the book to support the authors and the ad-free Holloway reading experience. You get instant digital access, commentary and future updates, and a high-quality PDF download.
For your convenience, this template document is available as a Google Doc to make it easier to copy and edit. All material here is provided for illustration only; please read the disclaimer before use.
[COMPANY]
Convertible Note Offering Term Sheet
This term sheet summarizes the principal terms pursuant to which [Company], a [Delaware/etc.] ________ corporation (the “Company”), will raise up to $________ through the issuance of promissory notes (the “Notes”) to a limited number of “accredited” investors. The Company will make available to each investor all information the investor reasonably requests so that the investor can familiarize him/her/itself with the Company’s business. To the extent that these terms are inconsistent with the underlying legal documents (a Promissory Note), the terms of the Note control.
| Company: | [Company], a [Delaware] corporation. |
|---|---|
| Interest Rate: | The Notes will bear interest at ___% per annum. Interest will accrue and be payable upon maturity. |
| Conversion: | The Notes are convertible the next round of preferred stock issued by the Company in an equity financing in which the Company raises at least $[2,000,000] (excluding debt that is converting to preferred stock) which closes before the Maturity Date (as defined below), at the lower of (i) a [15-20%] discount to the purchase price of the securities sold in such offering, or (ii) the price per share determined by reference to the Valuation Cap, on a fully-diluted basis (but not considering the conversion of this note and other similar notes). |
| Valuation Cap: | $_________. |
| Maturity Date: | The Notes will mature ___ (__) years after their date of issuance (“Maturity Date”). |
| Minimum Investment: | $________ (waivable at the Company’s discretion). |
| Use of Proceeds: | The proceeds of the offering will be immediately available to the Company for general working capital purposes. |
| Size of the Offering: | $________. The Company reserves the right to raise a greater or lesser amount in its sole discretion. |
| Suitability: | An investment in the Notes is available to “accredited investors” who can bear the substantial risks involved and are willing to accept the lack of liquidity of their investment. |
| Subordination: | The Promissory Notes will be subordinated to other borrowings of the Company. |
| Closings: | There is no minimum amount required to be raised before the Company can accept subscriptions. The Company may hold any number of subsequent closings. |
| Amendment: | The Notes may be amended with the consent of the Company and holders of a majority in interest of the principal amount of the Notes outstanding. |
| Restricted Securities: | The Promissory Notes are not registered securities and are not transferable without the written approval of the Company. |
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE PROMISSORY NOTES. EACH INVESTOR SHOULD READ THE FORM OF PROMISSORY NOTE IN ITS ENTIRETY. IN ADDITION, INVESTORS SHOULD CONSULT THEIR TAX AND LEGAL ADVISORS AS TO THE IMPLICATIONS OF AN INVESTMENT IN THE NOTES.
For your convenience, this template document is available as a Google Doc to make it easier to copy and edit. All material here is provided for illustration only; please read the disclaimer before use.