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The Internet Compass

Venture

Term Sheet

A term sheet is a short, largely non-binding document setting out the proposed terms of an investment — valuation, amount raised, liquidation preference, board seats, protective provisions and other rights — before lawyers draft the binding legal agreements.

Most of a term sheet is non-binding by design, giving both sides room to walk away before legal costs are incurred, but a handful of clauses are typically binding immediately: confidentiality, exclusivity (a "no-shop" period preventing the company from soliciting other offers), and sometimes governing law.

The terms that get the least founder attention but matter most long-term are usually the control provisions — board composition, protective provisions requiring investor consent for specific company actions, and information rights — not the headline valuation number everyone focuses on first.