Quiz on Creating a Term Sheet for Investors

What is a term sheet?

• A preliminary, non-binding document

• A financial statement

• A legally binding contract

• A marketing plan

What are the two important aspects of a term sheet?

• Economics and Control

• Investment and Valuation

• Terms and Conditions

• Rights and Responsibilities

Which type of stock do most venture firms prefer to use?

• Common stock

• Debt stock

• Convertible preferred stock

• Equity stock

What is one of the first steps in creating a term sheet?

• Study the market

• Prepare to negotiate

• Get a lawyer

• Understand the content

What does 'liquidation preference' refer to?

• The voting rights of common shareholders

• The valuation of the company

• The right for preferred shareholders to get their investments back first

• The amount of investment required

What should you do if understanding the term sheet feels overwhelming?

• Focus on the legal aspects only

• Ignore it

• Share the responsibility with a partner or advisor

• Hire a consultant

Why is it important to get a lawyer when creating a term sheet?

• To create the business plan

• To understand the terms

• To negotiate with investors

• To draft the final agreement

What is a key part of the negotiation process according to Michael Wheeler?

• Value creation

• Legal compliance

• Market analysis

• Investor relations

What should you focus on during negotiations?

• Reducing the investment amount

• Minimizing investor involvement

• Creating competitive tension

• Avoiding discussions about valuation

What is one of the fundamental terms in a term sheet?

• Valuation of the company

• Company's marketing strategy

• Customer acquisition cost

• Employee benefits