2.

Term sheet

A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment.

The term sheet serves as a template and basis for more detailed, legally binding documents.

Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or
contract that conforms to the term sheet details is drawn up.

What's Included in a Term Sheet

The details to be included in a term sheet are highly dependent on the agreement at hand. What is included in a
angel investment, early funding investment term sheet will be substantially different than what's included in a
commercial real estate development term sheet.

Regarding an investment term sheet, commonly included details are:

1.Nonbinding Terms. Neither party is legally obligated to abide by whatever is outlined on the term sheet.

2.Company valuations, investment amounts, the percentage of stakes, and anti-dilutive provisions should be
spelled out clearly.

3.Voting rights. Startups seeking funding are usually at the mercy of VCs who want to maximize their investment
return. This can result in the investor asking for and obtaining a disproportionate influence on the company's
direction.

4.Liquidation preference. The term sheet should state how the proceeds of a sale will be distributed between the
entrepreneur and the investors.

5.Investor commitment. The term sheet should state how long the investor is required to remain vested.

*Key Components of Deal Structuring:*

1. *Valuation:* Determining the value of the assets, businesses, or securities involved in the transaction is a
critical starting point. Valuation methods may include discounted cash flow (DCF), comparable company analysis
(CCA), or precedent transactions.

2. *Transaction Financing:* - Identifying the sources of capital to fund the deal is crucial. Financing options may
include equity, debt, or a combination of both. The terms of financing, such as interest rates, repayment
schedules, and covenants, are integral to the deal structure.

3. *Deal Terms and Conditions:* Defining the terms and conditions of the deal, including purchase price,
payment structure, and any contingencies, is a fundamental aspect of deal structuring. This involves negotiations
between the parties to reach mutually acceptable terms.

4. *Legal Structure:*- Choosing the legal form of the transaction is important for tax implications, liability
considerations, and governance. Common structures include asset purchases, stock purchases, mergers, or joint
ventures.

5. *Governance and Control:*- Clearly defining how the business or asset will be governed post-transaction is
vital. This includes decisions on board composition, management roles, and control mechanisms.
6. *Due Diligence:* Conducting thorough due diligence is a key step in identifying and assessing risks associated
with the deal. This includes financial, legal, operational, and other relevant investigations.

7. *Earnouts and Contingent Consideration:* Incorporating earnouts or contingent consideration mechanisms

can align the interests of buyers and sellers. These arrangements tie a portion of the purchase price to the future
performance of the acquired business.

8. *Integration Planning:*Developing a plan for integrating the acquired business or assets into the existing
operations is crucial for a smooth transition and realizing synergies. Integration considerations may include
technology, culture, and human resources.

9. *Exit Strategies:* Anticipating and planning for potential exit strategies is important for long-term success. This
includes understanding the conditions under which stakeholders may exit the investment or the business may be
divested.

*Importance of Effective Deal Structuring:*

1. *Risk Mitigation:*- Deal structuring helps identify and address potential risks associated with the transaction,
ensuring that the parties involved are adequately protected.

2. *Value Creation:* Well-structured deals create value for all parties by aligning incentives, optimizing financing,
and capturing synergies.

3. *Legal and Regulatory Compliance:* Deal structuring ensures compliance with legal and regulatory
requirements, minimizing the risk of legal challenges post-transaction.

4. *Stakeholder Alignment:* - By aligning the interests of all stakeholders, effective deal structuring contributes
to the success and sustainability of the business or investment.

In summary, deal structuring is a comprehensive and strategic process that involves careful consideration of
various financial, legal, and operational factors. A well-structured deal sets the foundation for a successful
transaction and contributes to the long-term success of the involved parties.
Q.5 Seed Funding process – VCPE

Venture Capital/Private Equity (VCPE) seed funding refers to the investment made by venture capitalists or
private equity firms in early-stage startups or entrepreneurial ventures. The process typically involves several
stages from initial contact to the actual investment. Here's an overview of the VCPE seed funding process:

1. *Pre-Investment Preparation:*- *Startup Preparation:* Startups looking for seed funding need to prepare a
compelling business plan, a pitch deck, and a prototype or minimum viable product (MVP) that showcases the
product or service.

- *Investor Identification:* VCPE firms actively seek investment opportunities, but startups must also identify
potential investors that align with their industry, stage, and goals.

2. *Pitch and Initial Meetings:**Pitch Deck Presentation:* Startups present their business idea, value
proposition, market potential, and financial projections through a pitch deck. This presentation is crucial for
attracting the interest of potential investors.

- *Initial Meetings:* If the pitch generates interest, the startup meets with representatives from the VCPE firm
to discuss the business in more detail. These meetings allow both parties to assess compatibility and alignment
of objectives.

3. *Due Diligence:* *Investor Due Diligence:* VCPE firms conduct due diligence to thoroughly evaluate the
startup's business model, market potential, competitive landscape, financials, and team. This process helps the
investors assess the risks and potential returns of the investment.

- *Startup Due Diligence:* Simultaneously, startups may conduct due diligence on the VCPE firm to ensure they
are a good fit and can provide the necessary support beyond funding.

4. *Term Sheet Negotiation:*- *Offer and Terms:* If both parties remain interested after due diligence, the VCPE
firm may present a term sheet. This document outlines the key terms of the investment, including the amount of
funding, valuation, ownership stake, and any special rights or conditions.

- *Negotiation:* Negotiations take place to finalize the terms. This stage involves discussions on valuation,
board seats, governance, and other crucial aspects of the deal.

5. *Legal Documentation:* - *Legal Agreement:* Once the term sheet is agreed upon, legal documents, such as
the investment agreement, are drafted. These documents outline the rights and obligations of both parties.

- *Legal Review:* Legal teams from both the VCPE firm and the startup review and negotiate the terms within
the legal documents.

6. *Closing the Deal:* - *Signing and Funding:* After all legal matters are resolved and both parties are satisfied,
the deal is officially signed, and the funding is disbursed. This marks the completion of the seed funding process.

7. *Post-Investment Relationship:* - *Monitoring and Support:* VCPE firms actively monitor their portfolio
companies and provide support in areas such as strategic guidance, networking, and operational improvement.

- *Reporting and Communication:* Startups are expected to keep their investors informed about their progress
through regular reporting. Communication is crucial for maintaining a healthy investor-startup relationship.
The venture capital (VC) process involves multiple stages from initial identification of investment opportunities to
the eventual exit. Here's a general overview of the typical VC process:

1. Deal Sourcing:VC firms actively seek investment opportunities by networking, attending conferences, receiving
referrals, and monitoring industry trends.They may also proactively approach promising startups or
entrepreneurs.

2. Preliminary Screening:The VC firm conducts an initial review of potential investment opportunities.

This phase may involve assessing the business model, market potential, and the founding team.

3. Due Diligence:A comprehensive due diligence process is undertaken to evaluate various aspects of the target
company.Financial due diligence, legal due diligence, operational due diligence, and market due diligence are key
components.

4. Term Sheet Negotiation:If the due diligence is successful, the VC firm and the target company negotiate and
draft a term sheet.The term sheet outlines the key terms and conditions of the investment.

5. Final Due Diligence:A deeper level of due diligence may be conducted, including site visits, additional financial
analysis, and finalizing legal documentation.

6. Legal Documentation:Once terms are agreed upon, detailed legal documentation, including investment
agreements and shareholder agreements, is prepared.

7. Investment Committee Approval:The proposed investment is presented to the VC firm's investment committee
for final approval.The committee reviews the due diligence findings, terms, and potential risks.

8. Closing:Upon approval, the deal is officially closed, and the VC firm provides the agreed-upon funding to the
target company.Legal documents are executed, and ownership stakes are finalized.

9. Post-Investment Involvement:VC firms often take an active role in supporting the portfolio company post-
investment.This involvement may include board representation, strategic guidance, and leveraging the VC's
network for the company's benefit.

10. Monitoring and Value Addition:The VC firm closely monitors the portfolio company's performance, providing
guidance and support as needed.They may assist with strategic decisions, hiring key personnel, and scaling
operations.

11. Exit Strategy:VC firms aim for profitable exits to realize returns on their investments.

Common exit strategies include Initial Public Offerings (IPOs), mergers and acquisitions (M&A), or secondary
sales of their equity stake.

12. Portfolio Management:VC firms manage their portfolio of investments, continually assessing each company's
performance and potential.

13. Fundraising for Next Fund:VC firms continuously engage in fundraising activities for subsequent funds to
maintain their ability to invest in new opportunities.
PE process

The private equity (PE) investment process involves several stages, from deal sourcing to exit. Here's a general
overview of the typical private equity process:

1. Deal Origination:Private equity firms actively search for investment opportunities through various channels,
including industry connections, networking, proprietary deal sourcing, and collaboration with investment banks.

2. Preliminary Screening:PE firms conduct an initial evaluation of potential investment opportunities, considering
factors such as industry trends, market potential, and financial performance.

3. Non-Disclosure Agreement (NDA) and Confidentiality:If a potential opportunity is identified, the private equity
firm may sign an NDA with the target company to access more detailed information while maintaining
confidentiality.

4. Due Diligence:In-depth due diligence is conducted to assess the target company thoroughly.

This process includes financial due diligence, legal due diligence, operational due diligence, and commercial due
diligence.

5. Deal Structuring:Based on the findings of due diligence, the private equity firm negotiates and structures the
deal, determining aspects such as valuation, financing terms, and the legal structure of the investment.

6. Letter of Intent (LOI):If both parties are satisfied with the proposed terms, a non-binding Letter of Intent is
drafted, outlining the key terms of the deal and indicating the intention to move forward.

7. Final Due Diligence:A more detailed and final round of due diligence is conducted to confirm the accuracy of
information and address any outstanding issues.

8. Legal Documentation:Legal documentation, including the Purchase Agreement and other transaction
documents, is prepared to formalize the terms of the deal.

9. Investment Committee Approval:The proposed investment is presented to the private equity firm's investment
committee for final approval.The committee reviews the due diligence findings, terms, and potential risks before
granting approval.

10. Closing:Upon approval, the deal is closed, and the private equity firm provides the agreed-upon funding to
the target company.Legal documents are executed, and ownership stakes are established.

11. Post-Investment Management:Private equity firms typically take an active role in the management and
strategic decision-making of the portfolio company.They may appoint board members, implement operational
improvements, and assist in scaling the business.

12. Value Addition and Monitoring:Private equity firms work closely with the portfolio company to implement
value-add strategies, monitor performance, and address challenges.

13. Exit Strategy:Private equity firms plan for exit strategies to realize returns on their investment.Common exit
routes include selling to strategic buyers, conducting initial public offerings (IPOs), or secondary sales to other
investors.

14. Distribution of Returns:

A mutual fund is a type of investment vehicle that pools money from multiple investors to invest in a
diversified portfolio of stocks, bonds, or other securities. The structure of a mutual fund involves various key
elements and entities. Here is an overview of the typical components of a mutual fund structure:

1.Sponsor/Asset Management Company:The sponsor establishes the mutual fund and creates the initial
framework.

The asset management company is responsible for managing the fund's assets.

It makes investment decisions based on the fund's objectives and policies.

2.Trustee or Board of Directors:The trustee or board of directors is appointed to ensure that the mutual fund
operates in the best interests of the investors.

They oversee the actions of the asset management company to ensure compliance with regulations and the
fund's stated objectives.

3.Custodian:The custodian holds and safeguards the securities owned by the mutual fund.

It helps prevent fraud and ensures that the assets are accounted for correctly.

4.Transfer Agent:The transfer agent maintains shareholder records, including the number of shares each investor
holds.It processes transactions, such as purchases, redemptions, and transfers of fund shares.

5.Distributor:The distributor is responsible for distributing the mutual fund's shares to investors.

In some cases, the asset management company itself may handle distribution.

6.Investment Advisor:The investment advisor, often the same entity as the asset management company, provides
investment advice and manages the fund's portfolio.

The advisor makes decisions on buying and selling securities to achieve the fund's investment objectives.

7.Shareholders/Investors:Individuals or institutional investors who buy shares in the mutual fund.

Shareholders collectively own the fund and have the right to vote on certain matters.

8.Registrar:The registrar maintains the record of shareholders and their transactions.

It works closely with the transfer agent to update and manage the investor database.

9.Auditor:An independent auditor is responsible for auditing the mutual fund's financial statements.

The audit provides assurance to investors that the fund's financial information is accurate and in compliance with
accounting standards.

These components work together to create a structure that allows investors to pool their money and benefit
from professional management and diversification. Mutual funds come in various types, such as equity funds,
bond funds, money market funds, and hybrid funds, each with its own investment objectives and strategies.