Advanced Financial Management · Startup Finance

Pitch Presentation and Term Sheet for CA Final AFM

Updated 5 October 2026 · Fact-checked

A pitch presentation is a short, structured case you make to investors on the problem, solution, market, model, team, financials and funding ask. A term sheet is the non-binding summary of deal terms that follows. To solve questions, identify the clause or pitch element, apply it to the facts, and state its effect on investor and founder.

Understand Pitch Presentation and Term Sheet

A startup pitch is how a founder persuades an investor to fund the business. Investors back a startup on the story and the numbers together. So a good pitch is short and covers a fixed set of points: the problem, your solution, the market size, the business model, traction, competition, the team, the financial projections, and the funding ask with its planned use.

If an investor likes the pitch, due diligence follows and then a term sheet is issued. It is a document that sets out the main terms of the proposed investment: valuation, amount, type of security, rights of the investor, and conditions. Most of it is non-binding. Usually only a few clauses, such as confidentiality and exclusivity (no-shop), bind the parties. The final legal terms go into the shareholders' agreement and the subscription agreement.

Key clauses you should know:

Pre-money and post-money valuation: post-money = pre-money + investment. The investor's stake = investment ÷ post-money.
Liquidation preference: decides who gets paid first, and how much, when the company is sold or wound up. It can be non-participating or participating.
Anti-dilution protection: protects the investor if a later round is at a lower price (a down round).
Board seats, protective provisions and vetoes: give the investor a say in major decisions.
ESOP pool: shares set aside for employees, usually created before the round so that it dilutes existing holders.
Vesting, lock-in and drag-along / tag-along rights: keep founders committed and govern share sales.
Exit clauses: say how and when investors can cash out.

The end point of venture funding is the exit. Common routes are an IPO (shares listed on an exchange and investors sell over time), a trade sale or strategic acquisition by another company, a secondary sale to another investor, a buyback by the company or promoters, and a buyout such as a management buyout (MBO) or leveraged buyout (LBO), where the buyer uses borrowed funds. The route chosen affects the return, the time taken, and the control left with founders.

Key rules to remember

Post-money valuation: Post-money = Pre-money + New investment; Use the same basis (pre or post) when comparing offers.
Investor's ownership: Stake % = Investment ÷ Post-money valuation × 100; If the ESOP pool is created before the round, include it in the pre-money share count.
Price per share: Price per share = Pre-money valuation ÷ Pre-round fully diluted shares; Fully diluted means including the ESOP pool and convertibles, if the term sheet says so.
Non-participating liquidation preference: Investor receives the higher of (a) preference amount and (b) as-converted share of proceeds; The investor converts only if the as-converted amount is higher.
Participating liquidation preference: Investor receives preference amount + stake % × remaining proceeds; Check whether the term sheet caps the total participation.
Multiple on invested capital (MOIC): MOIC = Exit proceeds to investor ÷ Amount invested; Does not consider time. Use IRR when years are given.
Investor IRR (single inflow and outflow): IRR = (Exit proceeds ÷ Investment)^(1 ÷ n) − 1; n is the number of years held.

How to solve Pitch Presentation and Term Sheet questions

Questions on this topic are either descriptive (explain a pitch element, a clause or an exit route) or short numerical cases on valuation, stake, liquidation preference and returns. Use the same method for both.

1Read the case and mark what is asked: pitch element, clause, exit route, or a number.
2For a numerical case, write the facts: pre-money, investment, shares, preference terms and exit value.
3Compute post-money, price per share and the investor's stake before anything else.
4Apply the clause exactly as worded. For a liquidation preference, check whether it is participating, capped, and its multiple.
5For an exit, find the proceeds due to each class in order of priority, then the founder's balance.
6Compute MOIC or IRR if asked, using the holding period given.
7Interpret the result: say who gains, who is diluted, and why the clause matters to each side.
8For descriptive answers, write the definition, the purpose, its effect on investor and founder, and a one-line link to the case facts.

Quickest way: Stake, preference, then return

When to use it: Use this for a numerical case with limited time, when the question gives a valuation, an investment and an exit value.

Post-money = pre-money + investment. Stake = investment ÷ post-money.
Exit proceeds: write the investor's two possible payouts, preference and as-converted.
Pick the higher for non-participating. Add preference and share of balance for participating.
Founders and others get the remainder.
MOIC = investor payout ÷ investment. Take the n-th root for IRR if years are given.

Common mistakes in Pitch Presentation and Term Sheet

Treating the entire term sheet as legally binding.
It looks like a contract and lists many obligations.
Fix: State that it is generally non-binding, except clauses such as confidentiality and exclusivity, and that definitive agreements follow.
Computing the investor's stake on pre-money value.
The pre-money figure is the one quoted first in the question.
Fix: Always divide the investment by the post-money valuation, which is pre-money plus investment.
Ignoring the ESOP pool when finding price per share.
Students use only the shares currently held by founders.
Fix: If the pool is created before the round, include it in the pre-round share count so it dilutes existing holders, not the new investor.
Giving a participating preference investor only the preference amount, or double counting for non-participating.
The two types are not clearly separated in memory.
Fix: Non-participating: higher of preference or conversion. Participating: preference first, then share of the balance.
Listing exit routes without comparing them.
Students memorise the names only.
Fix: For each route state who buys, how control and timing are affected, and when it suits the business. For example, an IPO needs scale and market readiness.
Writing a pitch answer as a generic list.
The pitch elements are learnt as a fixed checklist.
Fix: Tie each element to the case, for example size the market with the figures given and link the funding ask to its use.

Worked examples

Example 1

AlphaTech, a startup, has a pre-money valuation of ₹18 crore and 9,00,000 fully diluted shares. A venture fund offers ₹6 crore for new shares. The term sheet provides a 1x non-participating liquidation preference. After 4 years the company is sold for ₹60 crore, and all shareholders are paid from the sale price. Find (a) the post-money valuation, (b) the price per share, (c) the fund's stake, and (d) the fund's proceeds and MOIC.

Show the solution

Post-money = ₹18 crore + ₹6 crore = ₹24 crore.
Price per share = ₹18,00,00,000 ÷ 9,00,000 = ₹200.
New shares = ₹6,00,00,000 ÷ ₹200 = 3,00,000 shares.
Total shares = 9,00,000 + 3,00,000 = 12,00,000.
Stake = 3,00,000 ÷ 12,00,000 = 25%, which also equals 6 ÷ 24.
At the exit, preference payout = 1 × ₹6 crore = ₹6 crore.
As-converted payout = 25% × ₹60 crore = ₹15 crore.
The fund takes the higher amount, so it converts and receives ₹15 crore.
MOIC = 15 ÷ 6 = 2.5 times.

Answer: Post-money ₹24 crore; price per share ₹200; fund stake 25%; fund proceeds ₹15 crore; MOIC 2.5 times.

Example 2

BetaSoft raised ₹10 crore from an investor at a post-money valuation of ₹40 crore, so the investor holds 25%. The investor has a 1x participating preference with no cap. The company is sold for ₹32 crore. Find the investor's and the founders' proceeds, and explain the effect of the clause on the founders.

Show the solution

Investor's preference = 1 × ₹10 crore = ₹10 crore.
Balance after preference = ₹32 crore − ₹10 crore = ₹22 crore.
Investor's share of the balance = 25% × ₹22 crore = ₹5.5 crore.
Investor's total = ₹10 crore + ₹5.5 crore = ₹15.5 crore.
Others receive the remainder = ₹32 crore − ₹15.5 crore = ₹16.5 crore.
Without the preference, the investor would get 25% × ₹32 crore = ₹8 crore.
Extra to the investor due to the clause = ₹15.5 crore − ₹8 crore = ₹7.5 crore, borne by the other shareholders.

Answer: The investor receives ₹15.5 crore and the founders and other holders together receive ₹16.5 crore. The participating preference gives the investor ₹7.5 crore more than its 25% share, which reduces the founders' payout at a modest exit value.

Exam tips

In descriptive answers, name each term sheet clause, say what it does, and state who it protects, the investor or the founder.
In numerical cases, always show post-money, price per share and stake before the exit calculation, so you earn marks even if a later step slips.
Read the preference wording carefully: participating or non-participating, the multiple, and any cap.
For exit questions, compare routes on control, timing, valuation and fit with the business, instead of just defining them.
Do the MCQ cases fast: the stake is investment ÷ post-money, and you can check any option against that.

Practice questions from Startup Finance

Pitch Presentation and Term Sheet: frequently asked questions

What should an investor pitch contain?

It should cover the problem, the solution, market size, business model, traction, competition, team, financial projections, and the funding ask with how the money will be used. Keep it short and back each point with numbers where you can.

Is a term sheet legally binding?

Mostly no. It records the main terms and the intent of both sides. Clauses such as confidentiality and exclusivity are usually binding, while the final binding terms go into the definitive agreements.

What is the difference between pre-money and post-money valuation?

Pre-money is the value of the company before the new investment. Post-money is the pre-money value plus the new money. The investor's stake is the investment divided by the post-money value.

What are the main exit routes for a startup investor?

The main routes are an IPO, a sale to a strategic buyer, a secondary sale to another investor, a buyback by the company or promoters, and a buyout such as an MBO or LBO. The right route depends on the size, growth and plans of the business.