Term Sheet
A non-binding document outlining the key terms and conditions of an investment.
Definition
A term sheet is a non-binding letter of intent that outlines the proposed terms of an investment deal before final legal documents are drafted. Key terms include valuation, investment amount, liquidation preferences, anti-dilution provisions, board composition, pro-rata rights, and information rights. Term sheets are typically non-binding, except for confidentiality and exclusivity clauses.
Why It Matters
While non-binding, most of the economics in a term sheet survive into the final investment agreement. Understanding term sheet terms — especially liquidation preferences, anti-dilution protections, and board seats — is critical to knowing what you are really agreeing to. Many founders focus solely on valuation and miss more impactful terms.