Term Sheet

A mostly non-binding document outlining the key terms of an investment: valuation, amount, and investor rights. It precedes the full legal paperwork and frames the real negotiation.

Mostly not, though certain clauses like confidentiality and exclusivity often are. It signals serious intent and sets the terms the final documents will follow. Treat it seriously even though it is not the final contract.

Valuation, the amount raised, liquidation preference, option pool size, board composition, and pro rata rights. The non-valuation terms can matter as much as the price. Read every line.

It determines who gets paid first, and how much, when the company is sold. A 1x non-participating preference is founder-friendly and standard. Aggressive preferences can leave founders with little in a modest exit.

Yes, and not only on valuation. Liquidation preferences, board seats, and pool size are all negotiable and consequential. Use an experienced startup lawyer; the cost is small next to the stakes.

Fixating on valuation and waving through the rest. A high valuation with aggressive terms can be worse than a lower one with clean terms. The structure decides what you actually keep.