Term sheet

A term sheet is a summary of the principal economic and governance terms proposed for an investment. For a priced equity round, it often covers valuation, investment amount, liquidation preference, board composition, voting rights, option-pool treatment, anti-dilution provisions, pro rata rights, and closing conditions.

Most provisions are described as non-binding until definitive documents are signed, while confidentiality, exclusivity, and expense clauses may be binding. The headline valuation is only one part of the deal. A lower valuation with straightforward terms can produce a better founder outcome than a higher valuation paired with a large preference or difficult control rights. Founders should compare scenarios using the full cap table and exit waterfall, review investor references, and use experienced counsel. A pitch deck creates the investment case but does not replace this negotiation. Once signed, a no-shop provision may restrict discussions with other investors, so teams should understand timing and remaining diligence before accepting it. Clear communication prevents late surprises from derailing the round.