A term sheet is a short, mostly non-binding document that lays out the key terms of a proposed investment, valuation, amount raised, liquidation preference, board seats, and investor protections, before lawyers draft the final deal.
Key takeaways
A term sheet is a short, mostly non-binding document that lays out the key terms of a proposed investment, valuation, amount raised, liquidation preference, board seats, and investor protections, before lawyers draft the final deal. Signing it signals serious intent and sets the framework both sides negotiate the definitive agreements against.
A Series A term sheet might propose $8M at a $32M post-money valuation, a 1x non-participating liquidation preference, and one investor board seat.
Most economic and control terms get decided at the term-sheet stage, not in the final paperwork, so what you accept here shapes ownership and governance for years. The valuation grabs attention, but preferences, pro-rata rights, and board composition often matter more. Have a CFO or lawyer pressure-test every clause before signing.