Term Sheet
A non-binding document outlining the key terms of a proposed investment before legal docs are drafted.
A term sheet summarises valuation, investment amount, share class, board composition, liquidation preferences, anti-dilution and investor rights. Though mostly non-binding, it sets the framework for the binding legal agreements that follow. Founders should understand each clause, as terms agreed here shape control and economics for years.
Examples
A VC issues a term sheet for £1m at £4m pre-money with a 1x non-participating liquidation preference. — Founders negotiate the option pool size on the term sheet before signing.
How it relates to The Startup Foundry
The Foundry’s Learn/Improve content demystifies term sheets so that when its network of investors makes an offer, you can negotiate from a position of understanding.