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Startup Investment Term Sheet Template for Nigeria

A comprehensive preliminary agreement document governed by Nigerian law that outlines the proposed terms and conditions for an investment in a startup company. This document serves as the foundation for subsequent detailed investment agreements and typically includes key terms such as investment amount, valuation, share class rights, governance provisions, and investor protections. While mostly non-binding, except for confidentiality and exclusivity provisions, it complies with Nigerian corporate law requirements, particularly the Companies and Allied Matters Act (CAMA) 2020 and the Investment and Securities Act 2007.

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What is a Startup Investment Term Sheet?

The Startup Investment Term Sheet is a crucial document used in the Nigerian startup ecosystem when companies seek to raise capital from investors. It serves as a preliminary framework that captures the essential commercial and legal terms of a proposed investment, typically used after initial discussions but before detailed due diligence and final documentation. This document must comply with Nigerian legislation, including CAMA 2020 and relevant securities laws, while also meeting international investment standards. It outlines key aspects such as valuation, investment structure, governance rights, and exit provisions, forming the basis for the subsequent detailed investment agreements. While generally non-binding (except for confidentiality and exclusivity clauses), it represents a significant milestone in the investment process and requires careful consideration from all parties involved.

What sections should be included in a Startup Investment Term Sheet?

1. Parties: Identification of the startup company, current founders, and the proposed investor(s)

2. Background: Brief context of the proposed investment and company's current status

3. Definitions: Key terms used throughout the term sheet

4. Investment Amount: Proposed investment amount, valuation, and corresponding equity percentage

5. Type of Securities: Description of the type of shares or securities to be issued

6. Pre-Money Valuation: Agreed valuation of the company before the investment

7. Capitalization: Post-investment capital structure of the company

8. Investor Rights: Key rights granted to investors including voting, board representation, and information rights

9. Founders' Commitments: Key commitments from founders including non-compete, full-time commitment, and vesting provisions

10. Corporate Governance: Board composition, voting thresholds, and reserved matters

11. Anti-Dilution Protection: Provisions protecting investor's shareholding percentage

12. Exit Rights: Tag-along, drag-along rights, and other exit-related provisions

13. Confidentiality: Binding provisions regarding confidentiality of negotiations and company information

14. Exclusivity: Binding provisions preventing the company from seeking other investors for a specified period

15. Closing Conditions: Conditions that must be met before investment completion

16. Binding Effect: Statement of which provisions are binding and non-binding

What sections are optional to include in a Startup Investment Term Sheet?

1. Liquidation Preference: Terms for preferential returns to investors in case of liquidation - include if preferred shares are being issued

2. Conversion Rights: Terms for converting preferred shares to ordinary shares - include if preferred shares are being issued

3. Preemptive Rights: Rights of existing shareholders to participate in future funding rounds - include for larger investments

4. ROFR and Co-Sale Rights: Right of first refusal and co-sale rights on transfer of shares - include for significant investments

5. Founder Loans: Terms of any outstanding loans to founders - include if relevant

6. IP Assignment: Confirmation of IP assignment to the company - include for technology startups

7. Key Person Insurance: Requirements for life insurance on key team members - include for larger investments

8. Employee Share Option Pool: Details of ESOP if required - include if employee options are planned

What schedules should be included in a Startup Investment Term Sheet?

1. Cap Table: Detailed breakdown of current and post-investment shareholding

2. Key Performance Indicators: Specific metrics and milestones tied to the investment

3. Use of Funds: Detailed breakdown of how investment funds will be utilized

4. Material Contracts: List of key contracts and commitments

5. Disclosed Liabilities: List of all known liabilities and potential claims

6. Reserved Matters: Detailed list of decisions requiring investor approval

7. Warranties: List of basic warranties to be given by the company and founders

Authors

Alex Denne

Advisor @ 蜜桃传媒AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Nigeria

Cost

Free to use

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