For entrepreneurs and business owners in California, securing a term sheet is a major step in the fundraising process. Once the term sheet is in hand, potential investors may speed up their evaluation processes and the next stages of the deal are set in motion. Following the receipt of the term sheet, legal review and due diligence can begin in earnest.
A negotiated, signed term sheet is a landmark for the entrepreneur and the investor. For the entrepreneur, it indicates that the days of soliciting investment may be coming to a close. For the investor, the term sheet indicates that his or her investment is preferred and the process can move from courtship to due diligence and finalizing the deal. A signed term sheet is also a good indication that the deal will go through rather than unravel before closing. Some deals do fall apart though, and entrepreneurs would do well to research their investors.
Business owners seeking investment have due diligence of their own to perform. For example, they should check up on their investors. Important factors include how many times the investor has submitted a term sheet but not completed the deal. No matter how much experience an entrepreneur has with an investor or how well-respected the investor is, there are no guarantees until the deal is closed.
For people in California who are approaching transactions like the sale of a business or the issuing of shares, a lawyer might be able to help. An attorney with experience in business formation and planning might review proposed transaction documents or draft a purchase and sale agreement that meets the needs and goals of the client. A lawyer might help by negotiating the terms of the transaction or by communicating with the other side to get the sale moving.