Draft Fund Term Sheet Scenario 01

Skill: Draft Fund Term Sheet with Issues Memo

1. Subject-matter triage

• Treat the fund term sheet as the primary deliverable and the issues memo as secondary; draft the term sheet first, then the memo after the term sheet content is complete.
• Read the full source set before writing: draft term sheet materials, PPM/LPA excerpts, side letters if present, sponsor notes, and prior fund materials used as comparators.
• Separate what is definitive from what is provisional. If the source record is incomplete, draft a clean investor-facing baseline and flag the missing points as open items rather than guessing.
• If multiple draft versions exist, identify the latest integrated draft and any later-in-time deviations that may control a disputed term.

2. Failure modes the skill is correcting

• Omitting core fund terms or using vague descriptions where market-standard drafting is expected.
• Identifying conflicts but failing to resolve them by authority, chronology, or document hierarchy.
• Missing the interaction between recycling and the management-fee base when recycling is permitted.
• Failing to flag off-market economics or governance terms with market context and investor-facing risk.
• Drafting a term sheet that reads like notes instead of a usable preliminary term sheet.
• Producing an issues memo that lists problems without stating recommended resolutions or open decisions.
• Treating all deviations as equal instead of distinguishing ordinary drafting cleanup from negotiated risk.
• Ignoring later-in-time or higher-order document language that likely controls the operative outcome.

3. Legal frameworks / domain conventions that apply

• Use market-standard private fund terminology for emerging manager growth equity fundraising.
• Include the core economic and governance terms expected in a preliminary fund term sheet: fund overview, strategy, term, investment period, fee mechanics, carry mechanics, waterfall, GP commitment, governance, transfer limits, reporting, and information rights.
• State management-fee mechanics with precision: rate, fee base, step-down timing, and any offsets or exclusions.
• State carried-interest mechanics with precision: carry percentage, preferred return if any, catch-up, clawback, escrow concept if any, and distribution sequencing.
• State key person mechanics with precision: devotion standard, trigger, cure, and reinstatement.
• State LP governance mechanics with precision: LPAC function, voting thresholds, removal rights, and carry treatment on removal.
• When the source set addresses the same subject differently, assume the operative drafting should harmonize the documents if possible; if not, identify the controlling formulation by document hierarchy, later timing, or specific-over-general logic.
• For recurring private-fund concepts, use ordinary market conventions as the benchmark for off-market analysis rather than scenario-specific numbers.

4. Analytical scaffolds

1. Inventory all source documents and identify which ones speak to each term.
2. Draft the term sheet section by section in conventional fund order, using concise investor-ready language.
3. For every material term, compare all formulations across the source set and note any discrepancy, omission, or ambiguity.
4. If a term appears in multiple documents, identify whether the conflict is substantive or merely stylistic, and recommend the cleaner operative formulation.
5. If recycling is permitted, test whether the drafting also addresses whether recycled amounts remain in the management-fee base; if not, treat that as an open issue.
6. For each off-market term, describe the deviation in relative market terms, the practical burden or negotiation risk, and whether the issue is cosmetic, economic, or governance-sensitive.
7. In the issues memo, present each issue as a discrete entry with the source documents, conflict or deviation, recommended resolution, and open items.
8. Where a term is not fully specified, do not fill the gap with invented precision; state the missing decision point and the consequence of leaving it unresolved.

5. Vertical / structural / temporal relationships

• Treat the operative fund agreement as controlling for economics if it is in draft form and specific enough to resolve the point; treat the term sheet as controlling only for terms not yet memorialized elsewhere.
• If the PPM, LPA, and term sheet differ, analyze from the most operative document outward, but explain any reason to prefer a later-in-time or more specific formulation.
• Give priority to specific drafting over generalized boilerplate when the two conflict.
• Use prior fund economics only as context for market positioning and off-market analysis, not as a substitute for current drafting instructions.
• Where the issue turns on sequence or timing, state the stage at which the term changes effect: launch, first closing, final closing, end of investment period, extension period, liquidation, or removal event.

6. Output structure conventions

• Produce two deliverables: a fund term sheet and a term-sheet issues memo.
• The term sheet should read like an investor-facing preliminary terms summary, with standard headings and crisp defined terms where needed.
• Keep economic terms internally consistent across the whole term sheet; do not use one basis in one section and a different basis elsewhere unless the drafting expressly distinguishes them.
• The issues memo should be organized as numbered issues, each with a severity label on a consistent ordinal scale defined once at the top.
• Each issue entry should include: the source documents involved, the discrepancy or off-market feature, the recommended resolution with rationale, the downstream consequence if unresolved, and any remaining open item.
• For each issue entry, tie the point back to the relevant fund term by category, and indicate whether it is a drafting cleanup, economic point, governance point, or investor-negotiation point.
• End the memo with a short Recommended Actions section that assigns each action to a role and ties it to the current drafting stage or next transaction milestone.
• Preserve a clean professional style suitable for external circulation; do not quote internal materials verbatim unless the task specifically requires surface verbatim quotes from internal documents.