Deal Terms
Term Sheet
A non-binding document outlining the key economic and governance terms of a proposed investment, serving as the basis for final legal documents.
A term sheet is the first formal written offer from an investor to a startup. It outlines the major terms of a proposed investment before lawyers draft the full legal documents. Term sheets are typically non-binding (neither party is legally obligated to close the deal), but represent a strong moral commitment — walking away after signing damages VC reputations. Key economic terms: pre-money valuation, investment amount, liquidation preference, anti-dilution provisions, and option pool size. Key governance terms: board composition, protective provisions, information rights, and pro-rata rights. Other provisions: no-shop clause (typically 30-60 days), conditions to closing. Negotiating a term sheet is one of the most important skills a founder can develop.