Before drafting from scratch, look at **VIMA** — the Venture Capital Investment Model Agreements published free by the Singapore Academy of Law and the Singapore Venture Capital and Private Equity Association. They are Singapore-law, widely recognised, and come with drafting notes. This document is written to help you understand and negotiate a term sheet, not to replace them.
Term Sheet
Preferred equity financing
Before drafting from scratch, look at VIMA — the Venture Capital Investment Model Agreements published free by the Singapore Academy of Law and the Singapore Venture Capital and Private Equity Association. They are Singapore-law, widely recognised, and come with drafting notes. This document is written to help you understand and negotiate a term sheet, not to replace them.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], UEN [UEN] |
| Lead investor | [NAME] |
| Round | [Series A] |
| Amount | S$ [AMOUNT] |
| Pre-money valuation | S$ [AMOUNT] |
| Option pool | [PERCENTAGE] post-closing, [included in the pre-money / created post-money] |
| Post-money valuation | S$ [AMOUNT] |
| Investor stake | [PERCENTAGE] fully diluted |
| Security | [Series A Preference Shares] |
| Exclusivity | [45] days |
| Target signing | [DATE] |
| Binding? | No, except exclusivity, confidentiality and costs |
1. Status of This Term Sheet
1.1This term sheet records the principal terms on which the Investor would invest. It is not legally binding, save for the provisions on exclusivity, confidentiality and costs, which are binding.
1.2No party is obliged to proceed, and either may withdraw at any time before definitive agreements are signed.
1.3Say this expressly. A detailed term sheet that omits a non-binding statement can generate an argument that a contract was formed — particularly where the parties then behave as if bound.
2. The Economics
| Term | Position | What it means |
|---|---|---|
| Investment amount | S$ [AMOUNT] | The new money |
| Pre-money valuation | S$ [AMOUNT] | The company’s agreed value before the investment |
| Option pool treatment | [Included in the pre-money] | Where the pool sits inside the pre-money, founders bear the entire dilution and the investor’s percentage is unaffected |
| Post-money valuation | S$ [AMOUNT] | Pre-money plus the investment |
| Price per share | S$ [AMOUNT] | Post-money divided by fully diluted shares |
| Investor holding | [PERCENTAGE] fully diluted | Including the pool and all convertibles as converted |
| [Tranching] | [Second tranche of S$ ______ on ______] | Milestone conditions must be objectively measurable |
6 more pages in the Word file
This is page 1 of the Word document, exactly as it appears when you open it. Fields shown like THIS are placeholders for you to complete.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
The Singapore Academy of Law and the Singapore Venture Capital and Private Equity Association publish the Venture Capital Investment Model Agreements free — term sheets, subscription agreement, shareholders’ agreement, convertible instruments and a model constitution, all Singapore law and all with drafting notes. Investors and their counsel will recognise them, which shortens negotiation. Use them as the base and use this document to understand what you are agreeing.
A detailed term sheet without a clear non-binding statement invites an argument that a contract was formed, particularly where the parties then act as though bound. Clause 1.1 states it, and carves out the three provisions that genuinely are binding.
A pool created inside the pre-money valuation dilutes existing shareholders only — the investor’s percentage is unchanged whatever its size. That means the investor has no reason to keep it small, and founders bear all of it. Model both treatments before agreeing, and note that reducing an oversized pre-money pool is often worth more than a valuation argument.
A higher valuation with a participating preference can leave founders worse off than a lower valuation with a 1x non-participating preference. Schedule 2 exists to make that concrete. Model the waterfall at realistic exit values, not just the optimistic one.
Broad-based weighted average adjusts proportionately to the size of a down round. Full ratchet reprices the investor’s entire holding as if it had invested at the lower price, which at a small down round can be extremely dilutive to founders. Broad-based weighted average is the market standard and worth holding out for.
A minority investor with a veto over budgets, hiring, borrowing and material contracts controls the business regardless of board composition. Schedule 1 separates the matters that are reasonable from those where the threshold is the negotiation and those worth resisting entirely. Thresholds should be set so that running the company normally requires no consent.
Drag-along lets a defined majority force everyone to sell. Where the trigger allows the investor plus a small group to compel a sale, founders can be dragged into an exit at a price and time they would not choose. Check the threshold, and consider a minimum price condition.
Investors will require founder vesting, and that is reasonable. Founders who have already worked for a year or two unpaid should ask for that period to be credited rather than restarting the clock. It is routinely granted when asked for and rarely offered.
A bad leaver definition extending to conduct the board considers detrimental hands the board a discretion to strip vested shares. Confine it to dismissal for cause, fraud and material breach. This is one of the most contested provisions in founder documents and one of the most important.
A 45-day exclusivity period during which the company cannot talk to other investors is a genuine concession, and it is binding. Keep it as short as the diligence realistically requires, and make sure it ends automatically if the investor withdraws or materially changes terms.
Agreeing to pay the investor’s legal costs is normal, but it should be capped and payable only on completion. An uncapped undertaking payable regardless of outcome means a failed round still costs the company real money.
Singapore has no exchange control regime — no pricing guidelines, no filings on foreign investment, no restrictions on returns to non-residents. Founders and investors coming from jurisdictions with such regimes should not import that machinery into the documents. What does apply is stamp duty on share transfers.
Preference rights agreed here must be reflected in an amended constitution before the shares are issued. Issuing preference shares where the constitution recognises only ordinary shares is a defect that surfaces at the next round and is awkward to fix.
Where the investment is split into tranches, the conditions for the second tranche must be objectively measurable. Milestones expressed as satisfaction of the investor give the investor an option rather than a commitment, and the company cannot plan around it.
Reflects Singapore practice current as of {{DATE OF USE}}. Market terms move, VIMA is periodically updated, and requirements under the Companies Act 1967 including share allotment filings and stamp duty change — take legal advice before signing a term sheet, and model the waterfall before agreeing the preference.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.