Term Sheet Summary

# Term Sheet Summary

Produces a plain-English summary of an equity financing term sheet, split into economics and control, so the attorney can walk a founder or company client through it and see which terms to discuss.

## What to ask for
- The term sheet (and any side letter, SAFE or note being converted, or prior financing documents it refers to).
- **Who the client is:** the company/founders, a lead investor, or a smaller investor. Ask once if not given.
- Current cap table (fully diluted, including existing option pool, outstanding SAFEs and convertible notes), if available.
- Prior rounds' terms, if any (existing preferred holders' rights affect this round).
- The client's priorities (e.g. keep board control, minimize dilution, speed of closing).
- If anything is missing, summarize what's there and mark gaps as [MISSING: ...]. Never compute ownership percentages without a cap table.

## How to work
1. **Deal basics.** Issuer, security (series of preferred, common, SAFE, note), lead investor and other investors, total raise, minimum and maximum, closing mechanics (single or multiple closings), binding vs. non-binding provisions (usually only confidentiality, exclusivity/no-shop, expenses and governing law are binding).
2. **Economics.** For each, state the term, then one plain-English line on what it means for the client:
   - **Valuation:** pre-money vs. post-money, price per share, and how the price is calculated.
   - **Option pool:** size, whether it's included in the pre-money (the "option pool shuffle" shifts dilution to existing holders), whether it's an increase or refresh.
   - **Conversion of SAFEs and notes:** whether they convert in this round and whether they're counted in the pre-money.
   - **Liquidation preference:** multiple (1x, more), seniority (stacked, pari passu, junior to prior series), and what counts as a liquidation event.
   - **Participation:** non-participating, fully participating, or participating with a cap. Show a simple example only if amounts are given.
   - **Anti-dilution:** broad-based weighted average, narrow-based, or full ratchet; carve-outs for option grants and other exempt issuances.
   - **Dividends:** non-cumulative "when, as and if declared", or cumulative; rate; whether paid in cash or stock.
   - **Redemption rights**, pay-to-play, and conversion terms (optional and mandatory conversion triggers).
3. **Control.** Same format:
   - **Board:** size and composition (common seats, preferred seats, independent seats), who appoints the independent, observer rights.
   - **Protective provisions:** what the preferred can veto (new senior or pari passu stock, sale, changes to charter, debt, dividends, board size, redemptions); whether by series or as a class; threshold.
   - **Drag-along:** who can trigger (board, preferred majority, common majority), protections for dragged holders (same consideration, limited liability, no non-competes).
   - **Pro rata / preemptive rights:** who gets them, any major-investor threshold, super pro rata.
   - **Information rights:** financials, budgets, inspection, major-investor threshold.
   - Also: registration rights, right of first refusal and co-sale on founder shares, founder vesting or re-vesting, acceleration, no-shop length, expenses cap for investor counsel, conditions to closing.
4. **Flag** any term that looks off-market or unusually favorable to one side as "Discuss" with a one-line reason. Do not conclude it is off-market.
5. **Missing terms.** Note standard terms the sheet is silent on.

## Output

**Term Sheet Summary: [Company], [Series / round]**  Client: [who]  Lead investor: [name]  Reviewed: [date]

1. **Snapshot** (3-4 lines): raise, valuation, security, lead, the two or three terms that matter most to the client.
2. **Economics** table: Term | What the sheet says | Plain English | Discuss?
3. **Control** table: Term | What the sheet says | Plain English | Discuss?
4. **Binding provisions** (bullets: no-shop period, confidentiality, expenses, governing law)
5. **Items to discuss** (numbered, with one-line reason each, client's priorities first)
6. **Silent or missing terms** (bullets)
7. **Questions for the client** (numbered)
8. **To verify** (securities law exemption and filing requirements, state notice filings, tax issues such as restricted stock elections for re-vested founder shares)

## Rules
- Draft for attorney review; not legal advice to the client.
- Securities filing requirements and deadlines, state notice filings and tax election timing vary and change: list them under "To verify" with what to check, never state them as final.
- Never invent facts, dates, amounts, percentages, or cap table figures. Unknown = [MISSING].
- Flag unusual terms as "Discuss", never as "off-market" or "unacceptable". Market practice varies by stage, sector and region.
- Show math only from numbers in the documents; label it illustrative.