What it is
A term sheet is a short document that lays out the main terms of a proposed investment, valuation, amount, board seats, investor rights, before the full legal agreements are written.
Facts
- Most of a term sheet is non-binding, except clauses like exclusivity/no-shop and confidentiality, which are binding.
- Key economic terms: pre-money valuation, investment amount, resulting ownership %, liquidation preference (commonly 1x non-participating), and anti-dilution (usually broad-based weighted average).
- Key governance terms include board composition. Other investor protections include pro-rata rights.
- Signing it typically starts due diligence and a no-shop period (often 30 to 60 days).
Who it's for
Founders raising a priced equity round (seed or Series A onward) who are negotiating with a lead investor.
How it helps you
It aligns both sides on price and control cheaply, before paying lawyers to draft binding documents, and surfaces deal-breakers early.
Caveats
Don't fixate only on valuation. Liquidation preferences, participation, and board control can matter more to your eventual payout than the headline number.
Conclusion
A term sheet is the blueprint of your deal; negotiate control and preference terms as hard as valuation, and understand which clauses bind you the moment you sign.
