Enhanced

Model Term Sheet

v2.0
In partnership with

This sample document is the work product of a national coalition of attorneys who specialize in venture capital
financings, working under the auspices of the NVCA. This document is intended to serve as a starting point only,
and should be tailored to meet your specific requirements. This document should not be construed as legal advice
for any particular facts or circumstances. Note that this sample document presents an array of (often mutually
exclusive) options with respect to particular deal provisions. This is an “enhanced” version of the document that
contains market analysis of deal term frequency and usage, provided in partnership with Aumni, Inc. For more
information on data and methodology, please visit www.aumni.fund.

Last Updated May 2021

 What is new in version 2.0?
The Enhanced Model Term Sheet v2.0 includes 13 additional deal term insights as well as updated
data, comparing calendar year 2020 with all time data (excluding 2020). Aumni’s platform analyzed
the executed legal agreements of over 100,000 venture transactions from more than 40,000 investors
representing over $1 trillion in assets under management.

How to use the Enhanced Features in this Model Document

Throughout this document, there will appear blue underlined text, indicating the availability of relevant
data or analysis of that specific term. To read this analysis, simply click the link to follow. To return to
the original spot in the document, click the “Click to go back” link. The pages containing the data and
analysis may be removed for further customization and execution.

Median Fully-Diluted Ownership Percent Purchased by New Money........................................................20

Median Fully-Diluted Ownership Percent Purchased by Lead Investor.....................................................20
Median Percentage of Round Purchased by Lead Investor.......................................................................21
Median Number of Investors (Syndicate) in an Equity Financing.............................................21
Median Amount Raised in an Equity Financing in the Round ($M)..........................................22
Median Convertible Principle and Interest of Convertible Notes in the Round.........................22
Median Valuation Cap in Convertible Security (All Types).......................................................23
Median Option Pool Size as a Percentage of Fully-Diluted Post-Money Capitalization............24
Median Post-Money Valuation ($M).........................................................................................24
Median Common Stock Issued as a Percent of Fully-Diluted Ownership.................................25
Frequency of Non-Cumulative Dividends.................................................................................26
Frequency of 1x Liquidation Preference Multiplier.....................................................................................27
Frequency of Participating Preferred......................................................................................................... 27
Median Cap on Participating Preferred Stock..........................................................................28
Frequency of Broad Based Anti-Dilution..................................................................................29
Frequency of Pay-to-Play Provision........................................................................................................... 29
Frequency of Redemption Rights.............................................................................................................. 30
Median Lead Investor Counsel Fee Cap................................................................................................... 30
Frequency of Registration Rights............................................................................................................... 31
Median Major Investor Threshold as a Percent of New Money.................................................................32
Median Major Investor Threshold as a Percent of Fully-Diluted Ownership..............................................32
Frequency of Pro-Rata Rights for All Investors in the Round...................................................33
Frequency of Right of First Refusal (ROFR)............................................................................33
Median Number of Board Seats After the Round...................................................................34
Frequency of Drag Along Rights................................................................................................................ 34

Last Updated May 2021 2

 Preliminary Note
This term sheet maps to the NVCA Model Documents, and for convenience the provisions are grouped
according to the particular Model Document in which they may be found. Although this term sheet is
somewhat longer than a “typical” VC Term Sheet, the aim is to provide a level of detail that makes the
term sheet useful as both a road map for the document drafters and as a reference source for the
business people to quickly find deal terms without the necessity of having to consult the legal documents
(assuming of course there have been no changes to the material deal terms prior to execution of the final
documents). For Series B and later transactions, consider substantially shortening to refer to deal terms
being “consistent with prior rounds, subject to reasonable review by Lead Investor” (as noted in the prior
sentence, deal terms often are negotiated further between term sheet and closing, so relying on a term
sheet for one round in a later round may prove inaccurate).

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 TERM SHEET
FOR SERIES A PREFERRED STOCK FINANCING OF
[INSERT COMPANY NAME], INC.
[__________, 20__]

This Term Sheet summarizes the principal terms of the Series A Preferred Stock
Financing of [___________], Inc., a [Delaware] corporation (the “Company”). In consideration
of the time and expense devoted and to be devoted by the Investors with respect to this
investment, the No Shop/Confidentiality provisions of this Term Sheet shall be binding
obligations of the Company whether or not the financing is consummated. No other legally
binding obligations will be created until definitive agreements are executed and delivered by all
parties. This Term Sheet is not a commitment to invest, and is conditioned on the completion of
the conditions to closing set forth below. This Term Sheet shall be governed in all respects by
the laws of [___________].1

Offering Terms

Security: Series A Preferred Stock (the “Series A Preferred”).

Closing Date: As soon as practicable following the Company’s acceptance of

this Term Sheet and satisfaction of the conditions to closing
(the “Closing”). [provide for multiple closings if applicable]

Conditions to Closing: Standard conditions to Closing, including, among other things,

satisfactory completion of financial and legal due diligence,
qualification of the shares under applicable Blue Sky laws, the
filing of a Certificate of Incorporation establishing the rights
and preferences of the Series A Preferred, [obtaining CFIUS
clearance and/or a statement from CFIUS that no further review
is necessary,]2 [and an opinion of counsel to the Company].3

Investors: Investor No. 1: [_______] shares ([__]%), $[_________]

1
Because a “nonbinding” term sheet governed by the law of a jurisdiction such as Delaware, New York or the
District of Columbia may in fact create an enforceable obligation to negotiate in good faith to come to agreement on
the terms set forth in the term sheet, parties should give consideration to the choice of law selected to govern the
term sheet. Compare SIGA Techs., Inc. v. PharmAthene, Inc., Case No. C.A. 2627 (Del. Supreme Court May 24,
2013) (holding that where parties agreed to negotiate in good faith in accordance with a term sheet, that obligation
was enforceable notwithstanding the fact that the term sheet itself was not signed and contained a footer on each
page stating “Non Binding Terms”); EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220 (S.D.N.Y. 2012);
Stanford Hotels Corp. v. Potomac Creek Assocs., L.P., 18 A.3d 725 (D.C. App. 2011) with Rosenfield v. United
States Trust Co., 5 N.E. 323, 326 (Mass. 1935) (“An agreement to reach an agreement is a contradiction in terms
and imposes no obligation on the parties thereto.”); Martin v. Martin, 326 S.W.3d 741 (Tex. App. 2010); Va. Power
Energy Mktg. v. EQT Energy, LLC, 2012 WL 2905110 (E.D. Va. July 16, 2012).
2
To be included if the parties review the facts of the investment and determine that a CFIUS filing is warranted.
Where a mandatory filing is necessary, that filing must be submitted 45 days in advance of closing, but obtaining
CFIUS clearance in advance of closing is not a requirement of law. However, submitting a CFIUS filing and then
closing before the review process is completed creates regulatory risks for all parties that are best avoided if the
timing of the investment permits.
3
See NVCA Model Legal Opinion for detailed commentary on legal opinions.

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 Investor No. 2: [_______] shares ([__]%), $[_________]

[as well other investors mutually agreed upon by Investors and

the Company]

Amount Raised:4 $[________], [including $[________] from the conversion of

SAFEs/principal [and interest] on bridge notes].5

Pre-Money Valuation: The price per share of the Series A Preferred (the “Original
Purchase Price”) shall be the price determined on the basis of a
fully-diluted pre-money valuation of $[_____] (which pre-
money valuation shall include an [unallocated and
uncommitted] employee option pool representing [__]% of the
fully-diluted post-money capitalization) and a fully-diluted
post-money valuation of $[______].

CHARTER

Dividends: [Alternative 1: Dividends will be paid on the Series A

Preferred on an as-converted basis when, as, and if paid on the
Common Stock.]

[Alternative 2: Non-cumulative dividends will be paid on the

Series A Preferred in an amount equal to $[_____] per share of
Series A Preferred when and if declared by the Board of
Directors.]

[Alternative 3: The Series A Preferred will carry an annual [__]

% cumulative dividend [payable upon a liquidation or
redemption]. For any other dividends or distributions,
participation with Common Stock on an as-converted basis.]6

Liquidation Preference: In the event of any liquidation, dissolution or winding up of the

Company, the proceeds shall be paid as follows:

[Alternative 1 (non-participating Preferred Stock): First pay

[__ times] the Original Purchase Price [plus [accrued and]
4
This provision would have to be modified for staged investments or investments dependent on the achievement
of milestones by the Company. See Model Life Sciences Term Sheet for such provisions.
5
Convertible instruments that convert at a discount may provide for a “shadow” or “subseries” of Preferred that
is identical to the new round security except with respect to the amount received on liquidation, so that in a
downside exit scenario all investors are at best only getting their money back. Be clear in the term sheet whether the
shares issued on conversion are part of the pre-money capitalization or post-money capitalization.
6
In some cases, accrued and unpaid dividends are payable on conversion as well as upon a liquidation event. Most
typically, however, dividends are not paid if the preferred is converted. Another alternative is to give the Company
the option to pay accrued and unpaid dividends in cash or in common shares valued at fair market value. The latter
are referred to as “PIK” (payment-in-kind) dividends, which are quite rare in this context.

Last Updated May 2021 5

 declared and unpaid dividends] on each share of Series A
Preferred (or, if greater, the amount that the Series A Preferred
would receive on an as-converted basis). The balance of any
proceeds shall be distributed pro rata to holders of Common
Stock.]

[Alternative 2 (full participating Preferred Stock): First pay

[___ times] the Original Purchase Price [plus accrued and
declared and unpaid dividends] on each share of Series A
Preferred. Thereafter, the Series A Preferred participates with
the Common Stock pro rata on an as-converted basis.]

[Alternative 3 (cap on Preferred Stock participation rights):

First pay [___ times] the Original Purchase Price [plus accrued
and declared and unpaid dividends] on each share of Series A
Preferred. Thereafter, Series A Preferred participates with
Common Stock pro rata on an as-converted basis until the
holders of Series A Preferred receive an aggregate of [_____]
times the Original Purchase Price (including the amount paid
pursuant to the preceding sentence).]

A merger or consolidation (other than one in which

stockholders of the Company own a majority by voting power
of the outstanding shares of the surviving or acquiring
corporation) or a sale, lease, transfer, exclusive license or other
disposition of all or substantially all of the assets of the
Company will be treated as a liquidation event (a “Deemed
Liquidation Event”), thereby triggering payment of the
liquidation preferences described above unless the holders of
[___]%7 of the Series A Preferred elect otherwise (the
“Requisite Holders”). [The Investors’ entitlement to their
liquidation preference shall not be abrogated or diminished in
the event part of the consideration is subject to escrow or
indemnity holdback in connection with a Deemed Liquidation
Event.]8

Voting Rights: The Series A Preferred shall vote together with the Common
Stock on an as-converted basis, and not as a separate class,
except (i) so long as [insert fixed number or %] of the shares of
Series A Preferred issued in the transaction are outstanding, the
Series A Preferred as a separate class shall be entitled to elect
[_______] [(_)] members of the Board of Directors ([each a]
“Preferred Director”), (ii) as required by law, and (iii) as
7
Careful thought should be given to the voting threshold based on the makeup of the round, especially if multiple
series/classes are implicated. Also bear in mind that anti-dilution adjustments may result in changes in voting
power.
8
See Section 2.3.4 of the Model Certificate of Incorporation for an explanation of this provision.

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 provided in “Protective Provisions” below. The Company’s
Charter will provide that the number of authorized shares of
Common Stock may be increased or decreased with the
approval of a majority of the Preferred and Common Stock,
voting together as a single class, and without a separate class
vote by the Common Stock.9

Protective Provisions: So long as [insert fixed number or %] shares of Series A

Preferred issued in the transaction are outstanding, in addition
to any other vote or approval required under the Company’s
Charter or Bylaws, the Company will not, without the written
consent of the Requisite Holders, either directly or by
amendment, merger, consolidation, recapitalization,
reclassification, or otherwise:

(i) liquidate, dissolve or wind-up the affairs of the Company

or effect any Deemed Liquidation Event; (ii) amend, alter,
or repeal any provision of the Charter or Bylaws [in a
manner adverse to the Series A Preferred Stock]; (iii) create
or authorize the creation of or issue any other security
convertible into or exercisable for any equity security unless
the same ranks junior to the Series A Preferred with respect
to its rights, preferences and privileges, or increase the
authorized number of shares of Series A Preferred; (iv) sell,
issue, sponsor, create or distribute any digital tokens,
cryptocurrency or other blockchain-based assets without
approval of the Board of Directors[, including the Investor
Directors]; (v) purchase or redeem or pay any dividend on
any capital stock prior to the Series A Preferred, other than
stock repurchased at cost from former employees and
consultants in connection with the cessation of their service,
[or as otherwise approved by the Board of Directors[,
including the approval of [at least one] Preferred Director];
or (vi) [adopt, amend, terminate or repeal any equity (or
equity-linked) compensation plan or amend or waive any of
the terms of any option or other grant pursuant to any such
plan; (vii)]10 create or authorize the creation of any debt
security[, if the aggregate indebtedness of the Corporation
and its subsidiaries for borrowed money following such
action would exceed $[____] [other than equipment leases,
bank lines of credit or trade payables incurred in the
ordinary course] [unless such debt security has received the
9
For corporations incorporated in California, one cannot “opt out” of the statutory requirement of a separate class
vote by Common Stockholders to authorize shares of Common Stock. The purpose of this provision is to “opt out”
of DGCL 242(b)(2). If (contrary to the protective provisions in this Term Sheet) the Preferred Stock is not intended
to be able to block future financings, include a 242(b)(2) waiver for the Preferred Stock as well.
10
See footnote in model charter.

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 prior approval of the Board of Directors, including the
approval of [at least one] Preferred Director; [or](viii) create
or hold capital stock in any subsidiary that is not wholly-
owned, or dispose of any subsidiary stock or all or
substantially all of any subsidiary assets; [or (ix) increase or
decrease the authorized number of directors constituting the
Board of Directors or change the number of votes entitled to
be cast by any director or directors on any matter].

Optional Conversion: The Series A Preferred initially converts 1:1 to Common Stock
at any time at option of holder, subject to adjustments for stock
dividends, splits, combinations and similar events and as
described below under “Anti-dilution Provisions.”

Anti-dilution Provisions: In the event that the Company issues additional securities at a
purchase price less than the current Series A Preferred
conversion price, such conversion price shall be adjusted in
accordance with the following formula:

CP2 = CP1 * (A+B) / (A+C)

Where:
CP2 = Series A Conversion Price in effect immediately
after new issue
CP1 = Series A Conversion Price in effect immediately
prior to new issue
A = Number of shares of Common Stock deemed to
be outstanding immediately prior to new issue
(includes all shares of outstanding common
stock, all shares of outstanding preferred stock
on an as-converted basis, and all outstanding
options on an as-exercised basis; and does not
include any convertible securities converting
into this round of financing)11
B = Aggregate consideration received by the
Company with respect to the new issue divided
by CP1
C = Number of shares of stock issued in the subject
transaction

The foregoing shall be subject to customary exceptions,

including, without limitation, the following:

(i) securities issuable upon conversion of any of the Series

A Preferred, or as a dividend or distribution on the Series A
Preferred; (ii) securities issued upon the conversion of any
11
The most broad based formula would include shares reserved in the option pool; a narrower base would exclude
options or other convertibles. The formula above is the most typical.

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 debenture, warrant, option, or other convertible security;
(iii) Common Stock issuable upon a stock split, stock
dividend, or any subdivision of shares of Common Stock;
(iv) shares of Common Stock (or options to purchase such
shares of Common Stock) issued or issuable to employees
or directors of, or consultants to, the Company pursuant to
any plan approved by the Company’s Board of Directors
[including at least [one] Preferred Director(s)], and other
customary exceptions12.

Mandatory Conversion: Each share of Series A Preferred will automatically be

converted into Common Stock at the then applicable conversion
rate in the event of the closing of a firm commitment
underwritten public offering [with a price of [___] times the
Original Purchase Price]13 (subject to adjustments for stock
dividends, splits, combinations and similar events) and [gross]
proceeds to the Company of not less than $[_______] (a
“QPO”), or (ii) upon the written consent of the Requisite
Holders.

[Pay-to-Play: Unless the Requisite Holders elect otherwise, on any

subsequent [down] round all holders of Series A Preferred
Stock are required to purchase their pro rata share of the
securities set aside by the Board of Directors for purchase by
such holders. [A proportionate amount/all] of the shares of
Series A Preferred of any holder failing to do so will
automatically convert to Common Stock and lose
corresponding preferred stock rights, such as the right to a
Board seat if applicable.

[Redemption Rights:14 Unless prohibited by applicable law governing distributions to

stockholders, the Series A Preferred shall be redeemable at the
12
See Sections 4.4.1(a)(v)-(viii) of the Model Certificate of Incorporation for additional exclusions; consider
building into the term sheet to avoid later “negotiation”.
13
The per share price floor generally benefits small/minority holders. Consider 1) allowing a non-QPO to become
a QPO if an adjustment is made to the Conversion Price for the benefit of the Investor, so that such Investor does not
have the power to block an IPO and 2) whether IPO proceeds alone should be sufficient to establish the minimum
requirements for an IPO that triggers conversion.
14
Redemption provisions are rare and even more rarely exercised. If included, note that due to statutory
restrictions, the Company may not be legally permitted to redeem in the very circumstances where investors most
want it (the so-called “sideways situation”). Accordingly, and particularly in light of the Delaware Chancery
Court’s ruling in Thoughtworks (see discussion in Model Certificate of Incorporation), investors may seek
enforcement provisions to give their redemption rights more teeth - e.g., the holders of a majority of the Series A
Preferred shall be entitled to elect a majority of the Company’s Board of Directors, or shall have consent rights on
Company cash expenditures, until such amounts are paid in full. Also, while it is possible that the right to receive
dividends on redemption could give rise to a DGCL Section 305 “deemed dividend” problem, many tax practitioners
take the view that if the liquidation preference provisions in the Charter are drafted to provide that, on conversion,
the holder receives the greater of its liquidation preference or its as-converted amount (as provided in the Model
Certificate of Incorporation), then there is no Section 305 issue.

Last Updated May 2021 9

 option of the Requisite Holders commencing any time after the
five (5) year anniversary of the Closing at a price equal to the
Original Purchase Price [plus all accrued/declared but unpaid
dividends]. Redemption shall occur in three equal annual
portions. Upon a redemption request from the holders of the
required percentage of the Series A Preferred, all Series A
Preferred shares shall be redeemed [(except for any Series A
holders who affirmatively opt-out)].

STOCK PURCHASE AGREEMENT

Representations and Standard representations and warranties by the Company

Warranties: customary for its size and industry. [Representations and
warranties regarding CFIUS.]15

[Regulatory Covenants To the extent a CFIUS filing is or may be required: Investors

(CFIUS): and the Company shall use reasonable best efforts to submit the
proposed transaction to the Committee on Foreign Investment
in the United States (“CFIUS”) and obtain CFIUS clearance or
a statement from CFIUS that no further review is necessary
with respect to the parties’ [notice/declaration]].16

Counsel and Expenses: [Company] counsel to draft applicable documents. Company to

pay all legal and administrative costs of the financing [at
Closing], including (subject to the Closing) reasonable fees (not
to exceed $[_____]) and expenses of Investor counsel.

INVESTORS’ RIGHTS AGREEMENT

Registration Rights:

Registrable Securities: All shares of Common Stock issuable upon conversion of the
15
To be considered in order to address issues under the Defense Production Act of 1950 and related regulations
(DPA). Relevant representations may include whether or not a company works with “critical technologies” within
the meaning of the DPA, whether a company has operations or activities in particular sectors of the U.S. economy or
in the U.S. at all, whether a Company stores or maintains certain types of data, whether an Investor is foreign, and
whether an Investor has foreign government relationships, among others.
16
To be included if Investors review the facts of the investment and determine that a CFIUS filing is warranted.
When the Investors are foreign persons, a CFIUS filing may be mandatory with respect to certain investments ( e.g.,
some transactions involving “critical technologies”), and voluntary but advisable with respect to others. This
covenant may be paired with an explicit reference to the exercise of the redemption right in the Charter in the event
of a CFIUS-mandated divestiture of shares. A CFIUS “notice” is a full-form filing that results in a definitive
opinion by CFIUS regarding the national security risks associated with the transaction, but may take months to
obtain; a CFIUS “declaration” is a short-form filing that may not result in a definitive opinion by CFIUS but is
intended to be able to be obtained within 45 days. If a CFIUS filing is warranted, the parties may also elect to
negotiate a basic statement laying out the scope of Investors’ obligation to accept CFIUS conditions (e.g., will
Investors be obligated to accept conditions or restriction as a condition of CFIUS clearance that would have a
material adverse impact on the Investors?). Whether or not a CFIUS filing is made, the parties may wish to consider
other risk allocation measures or terms; examples include unilateral or bilateral waivers of responsibility for CFIUS-
related costs and penalties, indemnification terms, or other similar language.

Last Updated May 2021 10

 Series A Preferred and any other Common Stock held by the
Investors will be deemed “Registrable Securities.”17

Demand Registration: Upon earliest of (i) [three (3)-five (5)] years after the Closing;
or (ii) [six (6)] months following an initial public offering
(“IPO”), persons holding [__]%18 of the Registrable Securities
may request [one][two] (consummated) registrations by the
Company of their shares. The aggregate offering price for such
registration may not be less than $[5-15] million. A registration
will count for this purpose only if (i) all Registrable Securities
requested to be registered are registered, and (ii) it is closed, or
withdrawn at the request of the Investors (other than as a result
of a material adverse change to the Company).

Registration on Form S- The holders of [[10-30]% of the]19 Registrable Securities will

3: have the right to require the Company to register on Form S-3,
if available for use by the Company, Registrable Securities for
an aggregate offering price of at least $[3-5 million]. There will
be no limit on the aggregate number of such Form S-3
registrations, provided that there are no more than [two (2)] per
twelve (12) month period.

Piggyback Registration: The holders of Registrable Securities will be entitled to

“piggyback” registration rights on all registration statements of
the Company, subject to the right, however, of the Company
and its underwriters to reduce the number of shares proposed to
be registered to a minimum of [20-30]% on a pro rata basis and
to complete reduction on an IPO at the underwriter’s discretion.
In all events, the shares to be registered by holders of
Registrable Securities will be reduced only after all other
stockholders’ shares are reduced.

Expenses: The registration expenses (exclusive of stock transfer taxes,

underwriting discounts and commissions will be borne by the
Company. The Company will also pay the reasonable fees and
expenses, not to exceed $[______] per registration, of one
special counsel to represent all the participating stockholders.

Lock-up: Investors shall agree in connection with the IPO, if requested by

the managing underwriter, not to sell or transfer any shares of
17
Although not typical, founders/management may sometimes be granted limited registration rights.
18
The Company will want the percentage to be high enough so that a significant portion of the investor base is
behind the demand. Companies will typically resist allowing a single investor to cause a registration. Experienced
investors will want to ensure that less experienced investors do not have the right to cause a demand registration. In
some cases, different series of Preferred Stock may request the right for that series to initiate a certain number of
demand registrations. Companies will typically resist this due to the cost and diversion of management resources
when multiple constituencies have this right.
19
A percent threshold may not be necessary in light of the dollar threshold.

Last Updated May 2021 11

 Common Stock of the Company held immediately before the
effective date of the IPO for a period of up to 180 days
following the IPO (provided all directors and officers of the
Company [and [1 – 5]% stockholders] agree to the same lock-
up). [Such lock-up agreement shall provide that any
discretionary waiver or termination of the restrictions of such
agreements by the Company or representatives of the
underwriters shall apply to Investors, pro rata, based on the
number of shares held.]

Termination: [Upon a Deemed Liquidation Event [in which similar rights are
granted or the consideration payable to Investors consists of
cash or securities of a class listed on a national exchange]]
[and/or after the IPO, when the Investor and its Rule 144
affiliates holds less than 1% of the Company’s stock and all
shares of an Investor are eligible to be sold without restriction
under Rule 144 and/or] [T][t]he [third-fifth] anniversary of the
IPO.

No future registration rights may be granted without consent of

the holders of [a majority] of the Registrable Securities unless
subordinate to the Investor’s rights.

Management and A Management Rights letter from the Company, in a form

Information Rights: reasonably acceptable to the Investors, will be delivered prior to
Closing to each Investor that requires one.20

Any [Major] Investor (who is not a competitor) will be granted

access to Company facilities and personnel during normal
business hours and with reasonable advance notification. The
Company will deliver to such [Major] Investor (i) annual,
quarterly, [and monthly] financial statements, and other
information as determined by the Board of Directors; [and] (ii)
thirty days prior to the end of each fiscal year, a comprehensive
operating budget forecasting the Company’s revenues,
expenses, and cash position on a month-to-month basis for the
upcoming fiscal year[; and (iii) promptly following the end of
each quarter an up-to-date capitalization table]. [A “Major
Investor” means any Investor who purchases at least $[______]
of Series A Preferred.]

Right to Participate Pro All [Major] Investors shall have a pro rata right, based on their
Rata in Future Rounds: percentage equity ownership in the Company (assuming the
conversion of all outstanding Preferred Stock into Common
Stock and the exercise of all options outstanding under the
Company’s stock plans), to participate in subsequent issuances
20
See commentary in introduction to Model Managements Rights Letter, explaining statutory basis of such letter.

Last Updated May 2021 12

 of equity securities of the Company (excluding those issuances
listed at the end of the “Anti-dilution Provisions” section of this
Term Sheet and shares issued in an IPO). In addition, should
any [Major] Investor choose not to purchase its full pro rata
share, the remaining [Major] Investors shall have the right to
purchase the remaining pro rata shares.

[Matters Requiring So long as the holders of Series A Preferred are entitled to elect
Preferred Director a Director, the Company will not, without Board approval,
Approval: which approval must include the affirmative vote of [at least
one/each of] the then-seated Preferred Directors:

(i) make any loan or advance to, or own any stock or other
securities of, any subsidiary or other corporation, partnership,
or other entity unless it is wholly owned by the Company; (ii)
make any loan or advance to any person, including, any
employee or director, except advances and similar expenditures
in the ordinary course of business [or under the terms of an
employee stock or option plan approved by the Board of
Directors]; (iii) guarantee any indebtedness except for trade
accounts of the Company or any subsidiary arising in the
ordinary course of business; [(iv) make any investment
inconsistent with any investment policy approved by the Board
of Directors]; (v) incur any aggregate indebtedness in excess of
$[_____] that is not already included in a Board-approved
budget, other than trade credit incurred in the ordinary course of
business; (vi) hire, fire, or change the compensation of the
executive officers, including approving any option grants; (vii)
change the principal business of the Company, enter new lines
of business, or exit the current line of business; (viii) sell,
assign, license, pledge or encumber material technology or
intellectual property, other than licenses granted in the ordinary
course of business; or (ix) enter into any corporate strategic
relationship involving the payment contribution or assignment
by the Company or to the Company of assets greater than
[$________].]

Non-Competition Founders and key employee will enter into a [one] year non-
Agreements:21 competition agreement in a form reasonably acceptable to the
Investors.

Non-Disclosure, Non- Each current, future and former founder, employee and

21
Non-compete restrictions (other than in connection with the sale of a business) are prohibited in California, and
may not be enforceable in other jurisdictions as well. Some states (e.g., MA) require additional consideration in
exchange for signing and/or enforcing a non-compete. Consider also whether it should be up to the Board on a case-
by-case basis to determine whether any particular key employee is required to sign such an agreement. Non-
competes typically have a one year duration, although state law may permit up to two years.

Last Updated May 2021 13

 Solicitation and consultant will enter into a non-disclosure, non-solicitation and
Developments Agreement: proprietary rights assignment agreement in a form reasonably
acceptable to the Investors.

Board Matters: [Each Board Committee/the Nominating and Audit Committee

shall include at least one Preferred Director.] Company to
reimburse [nonemployee] directors for reasonable out-of-pocket
expenses incurred in connection with attending Board meeting.
The Company will bind D&O insurance with a carrier and in an
amount satisfactory to the Board of Directors. Company to
enter into Indemnification Agreement with each] Preferred
Director with provisions benefitting their affiliated funds in
form acceptable to such director. In the event the Company
merges with another entity and is not the surviving entity, or
transfers all of its assets, proper provisions shall be made so that
successors of the Company assume the Company’s obligations
with respect to indemnification of Directors.

Employee Stock Options: All [future] employee options to vest as follows: [25% after
one year, with remaining vesting monthly over next 36
months].

[Limitations on Pre- Notwithstanding anything to the contrary contained in the

CFIUS-Approval Exercise Transaction Agreements, Investors and the Company agree that
of Rights: 22 as of and following the initial Closing and until the CFIUS
clearance is received, Investors shall not obtain (i) “control” (as
defined in Section 721 of the Defense Production Act, as
amended, including all implementing regulations thereof (the
“DPA”)) of the Company, including the power to determine,
direct or decide any important matters for the Company; (ii)
access to any material nonpublic technical information (as
defined in the DPA) in the possession of the Company;
(iii) membership or observer rights on the Board of Directors of
the Company or the right to nominate an individual to a
position on the Board of Directors of the Company; or (iv) any
involvement (other than through voting of shares) in substantive
decision-making of the Company regarding (x) the use,
development, acquisition, or release of any of the Company’s
“critical technologies” (as defined in the DPA); (y) the use,
development, acquisition, safekeeping, or release of “sensitive
personal data” (as defined in the DPA) of U.S. citizens
maintained or collected by the Company, or (z) the
management, operation, manufacture, or supply of “covered
22
To be included if Investors intend to close the transaction in stages, with at least one stage occurring before
CFIUS clearance is obtained. The foreign investor side letter language on point would override any aspect of the
other transaction agreements that might, until CFIUS clearance is obtained, grant control of the Company or access
to aspects of the Company that might create grounds for CFIUS jurisdiction.

Last Updated May 2021 14

 investment critical infrastructure” (as defined in the DPA). To
the extent that any term in the Transaction Agreements would
grant any of these rights, (i)-(iv) to Investors, that term shall
have no effect until such time as the CFIUS clearance is
received.]

[Springing CFIUS [In the event that CFIUS requests or requires a filing/in the
Covenant: 23 event of [ ]], Investors and the Company shall use reasonable
best efforts to submit the proposed transaction to the Committee
on Foreign Investment in the United States (“CFIUS”) and
obtain CFIUS clearance or a statement from CFIUS that no
further review is necessary with respect to the parties’
[notice/declaration]. Notwithstanding the previous sentence,
Investors shall have no obligation to take or accept any action,
condition, or restriction as a condition of CFIUS clearance that
would have a material adverse impact on the Company or the
Investors’ right to exercise control over the Company.]

[Limitations on Information Notwithstanding anything to the contrary contained in the Stock

Rights: 24 Purchase Agreement, the Charter, the Investors’ Rights
Agreement, the Right of First Refusal And Co-Sale Agreement,
and the Voting Agreement (all of the agreements above together
being the “Transaction Agreements”), Investors and the
Company agree that as of and following [Closing/the initial
Closing], Investors shall not obtain access to any material
nonpublic technical information (as defined in Section 721 of
the Defense Production Act, as amended, including all
implementing regulations thereof (the “DPA”)) in the
possession of the Company.]

Other Covenants: Consult the NVCA Model Investors’ Rights Agreement for a
23
To be included if Investors believe that there is risk that CFIUS may request a filing of the transaction at some
future date or that a CFIUS filing may be required in the event of some future occurrence ( e.g., when the exit of
another investor causes Investor to obtain control over the selection of a Board member). A springing CFIUS
covenant provides certainty that all parties will proceed at CFIUS in orderly fashion. The further “notwithstanding”
sentence ensures that while parties will cooperate to make the CFIUS filing, Investor will not be obligated to accept
CFIUS-required conditions on the deal that might frustrate the purposes of its investment (i.e., the Investor can
abandon the proposed investment); more robust mitigation commitment language may be desirable from the
perspective of U.S. companies or U.S. investors seeking to limit foreign investors’ ability to abandon the transaction.
For more information on the differences between electing to pursue a CFIUS notice vs. a CFIUS declaration and
considering a reference to redemption rights, see footnote 16.
24
To be included if Investors are considered foreign entities under the DPA and intend to make an investment
outside the jurisdiction of CFIUS. This assumes that Investors intend not to obtain (i) a Board seat, observer, or
nomination right, (ii) more than 10% of the voting rights in the Company, or (iii) control over decision-making at
the Company, including with respect to Company technologies, data and infrastructure. If the Stock Purchase
Agreements, Charter, and other Transaction Agreements contemplate an investment on those terms, then a
disclaimer of information rights with respect to certain technical information should be the last necessary step to
remove the transaction from CFIUS jurisdiction. Further markups of the other Transaction Agreements would be
necessary to ensure that they are developed consistent with this intention.

Last Updated May 2021 15

 number of other covenants the Investors may seek; Investors
should include to the extent they feel any may be controversial
if not raised at the Term Sheet stage.

RIGHT OF FIRST REFUSAL/CO-SALE AGREEMENT

Right of First Refusal/ Company first and Investors second will have a right of first
Right of Co-Sale (Take-Me- refusal with respect to any shares of capital stock of the
Along): Company proposed to be transferred by current and future
employees holding 1% or more of Company Common Stock
(assuming conversion of Preferred Stock and whether then held
or subject to the exercise of options), with a right of
oversubscription for Investors of shares unsubscribed by the
other Investors. Before any such person may sell Common
Stock, he will give the Investors an opportunity to participate in
such sale on a basis proportionate to the amount of securities
held by the seller and those held by the participating Investors.25

VOTING AGREEMENT

Board of Directors: At the Closing, the Board of Directors shall consist of [______]
members comprised of (i) [name] as [the representative
designated by [____], as the lead Investor, (ii) [name] as the
representative designated by the remaining Investors, (iii)
[name] as the representative designated by the Common
Stockholders, (iv) the person then serving as the Chief
Executive Officer of the Company, and (v) [___] person(s) who
are not employed by the Company and who are mutually
acceptable [to the other directors26].

[Drag Along: Holders of Preferred Stock and all current and future holders of
greater than [1]% of Common Stock (assuming conversion of
Preferred Stock and whether then held or subject to the exercise
of options) shall be required to enter into an agreement with the
Investors that provides that such stockholders will vote their
shares in favor of a Deemed Liquidation Event or transaction in
which 50% or more of the voting power of the Company is
transferred and which is approved by [the Board of Directors]
the Requisite Holders [and holders of a majority of the shares of
Common Stock then held by employees of the Company
(collectively with the Requisite Holders, the “Electing
Holders”), so long as the liability of each stockholder in such

25
Certain exceptions are typically negotiated, e.g., estate planning or de minimis transfers. Investors may also
seek ROFR rights with respect to transfers by investors, in order to be able to have some control over the
composition of the investor group.
26
Other formulations might be majority of Common then held by employees and majority of Preferred, for
example.

Last Updated May 2021 16

 transaction is several (and not joint) and does not exceed the
stockholder’s pro rata portion of any claim and the
consideration to be paid to the stockholders in such transaction
will be allocated as if the consideration were the proceeds to be
distributed to the Company’s stockholders in a liquidation
under the Company’s then-current Charter, subject to
customary limitations.]27]

OTHER MATTERS

[Founders’ Stock: Buyback right/vesting for [__]% for first [12 months] after
Closing; thereafter, right lapses in equal [monthly] increments
over following [__] months.]28

[Existing Preferred Stock:29 The terms set forth above for the Series [_] Preferred Stock are
subject to a review of the rights, preferences and restrictions for
the existing Preferred Stock. Any changes necessary to
conform the existing Preferred Stock to this term sheet will be
made at the Closing.]

No-Shop/Confidentiality: The Company and the Investors agree to work in good faith
expeditiously towards the Closing. The Company and the
founders agree that they will not, for a period of [______] days
from the date these terms are accepted, take any action to
solicit, initiate, encourage or assist the submission of any
proposal, negotiation or offer from any person or entity other
than the Investors relating to the sale or issuance, of any of the
capital stock of the Company [or the acquisition, sale, lease,
license or other disposition of the Company or any material part
of the stock or assets of the Company] and shall notify the
Investors promptly of any inquiries by any third parties in
regards to the foregoing. The Company will not disclose the
terms of this Term Sheet to any person other than employees,
stockholders, members of the Board of Directors and the
Company’s accountants and attorneys and other potential
Investors acceptable to [_________], as lead Investor, without
the written consent of the Investors (which shall not be
unreasonably withheld, conditioned or delayed).

Expiration: This Term Sheet expires on [_______ __, 20__] if not accepted
by the Company by that date.

27
See Section 3.3 of the Model Voting Agreement for a list of additional conditions that might be required in
order for the drag-along to be invoked.
28
Most founders’ shares are already subject to vesting; consider what level of vesting is appropriate and revise to
marry up. Investors may also conclude not to change founder vesting.
29
Necessary only if this is a later round of financing, and not the initial Series A round.

Last Updated May 2021 17

 [Signature Page Follows]

Last Updated May 2021 18

 EXECUTED this [__] day of [_________], 20[__].

[Signature Blocks]

SIGNATURE PAGE TO TERM SHEET

Last Updated July 2020

Market Analytics for Deal Term Usage and Frequency
NVCA has partnered with Aumni, an investment analytics company, to provide market insights into deal terms found
in this Enhanced Model Term Sheet. The following section provides anonymized data from over 100,000 venture
transactions, extracted from executed legal agreements in the U.S. This data set represents over 40,000 unique
investors, spanning over a decade of data. Each section contains information related to the frequency of specific legal
and economic terms, segmented by stage where applicable.

Investors Data
Median Fully-Diluted Ownership Percent Purchased by New Money

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Median Fully-Diluted Ownership Percent Purchased by Lead Investor

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20
Median Percentage of Round Purchased by Lead Investor

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Median Number of Investors (Syndicate) in an Equity Financing

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21
Amount Raised Data

Median Amount Raised in an Equity Financing in the Round ($M)

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Median Convertible Principle and Interest of Convertible Notes in the Round

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22
Median Valuation Cap in Convertible Security (All Types)

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23
Pre-Money Valuation Data

Median Option Pool Size as a Percentage of Fully-Diluted Post-Money Capitalization

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Median Post-Money Valuation ($M)

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24
Median Common Stock Issued as a Percent of Fully-Diluted Ownership (Includes Option Pool)

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25
Dividends Data

Frequency of Non-Cumulative Dividends

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26
Liquidation Preference Data
Frequency of 1x Liquidation Preference Multiplier

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Frequency of Participating Preferred

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27
Median Cap on Participating Preferred Stock

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28
Anti-Dilution Provisions Data

Frequency of Broad Based Anti-Dilution

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Pay-to-play Data
Frequency of Pay-to-Play Provision

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29
Redemption Rights Data
Frequency of Redemption Rights

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Counsel and Expenses Data

Median Lead Investor Counsel Fee Cap

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30
Registration Rights Data
Frequency of Registration Rights

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31
Management and Information Rights Data
Median Major Investor Threshold as a Percent of New Money

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Median Major Investor Threshold as a Percent of Fully-Diluted Ownership

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32
Right to Participate Pro-Rata in Future Rounds Data

Frequency of Pro-Rata Rights for All Investors in the Round

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Right of First Refusal Data

Frequency of Right of First Refusal (ROFR)

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33
Board of Directors Data

Median Number of Board Seats After the Round

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Drag Along Data

Frequency of Drag Along Rights

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34