5 terms
Process & paperwork
Term sheets, warranties, disclosure letters and the one tax election that has cost American angels the most money.
Term sheet
Letter of intent · Heads of terms
A short, mostly non-binding summary of a proposed investment's key terms, signed before the full legal documents are drafted.
Read the term →No-shop / exclusivity
Exclusivity period · Standstill
A binding commitment by the company not to solicit or negotiate with other investors for a defined period after signing the term sheet.
Read the term →Warranties & representations
Reps and warranties
Statements of fact about the company given by the company and sometimes its founders in the investment documents, which give investors a claim if they turn out to be untrue.
Read the term →Disclosure letter
A document delivered alongside the investment agreement in which the company sets out the exceptions to its warranties — everything that would otherwise make a warranty untrue.
Read the term →83(b) election
A US tax election, filed within 30 days of receiving restricted stock, to be taxed on its value at grant rather than as it vests — a deadline with no extensions and severe consequences for missing it.
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