A term sheet is a short, mostly non-binding document that sets out the main terms of an investment: how much is invested, at what valuation, and what rights the investor gets. Once both sides sign it, lawyers turn it into the final legal documents.
Example
Why it matters for early-stage founders
Most of the economics and control of your company are decided on this one or two page document. After signing, there is little room to renegotiate, so the term sheet is where founders win or lose the deal.
The common mistake
Focusing only on the valuation headline. A higher valuation with a large pre-money option pool, a participating preference or heavy control terms can leave founders with less than a lower, cleaner offer.
Check your raise before the term sheet arrives
Model what the offer means for your ownership, then make sure your business holds up to the questions that come before any term sheet.
Try the valuation calculator