Term Sheet
Also known as: Investment Term Sheet, TS
A non-binding document outlining the key terms and conditions of a proposed investment.
Full Definition
A term sheet sets out the economic and governance terms of an investment round before legal documents are drafted. Key economic terms include valuation, investment amount, option pool, and liquidation preferences. Key governance terms include board composition, protective provisions, and anti-dilution provisions. Term sheets are non-binding but set expectations that are difficult to renegotiate — the terms agreed in a term sheet almost always appear in the final documents.
Example
A Series A investor issues a term sheet offering $10M at a $30M pre-money valuation with a 1x non-participating liquidation preference, a 20% option pool, and two board seats. The founders negotiate the option pool expansion to pre-money and accept the other terms.