What is a Term Sheet?
A term sheet is a document that outlines the key terms of a proposed investment. It’s typically non-binding but sets expectations for final documents.
Key Terms
Economic Terms
- Valuation: Pre-money and post-money
- Investment Amount: Total being raised
- Liquidation Preference: Who gets paid first
- Anti-dilution: Protection against down rounds
Control Terms
- Board Composition: Who sits on board
- Protective Provisions: Investor veto rights
- Voting Rights: Decision-making power
Other Terms
- Option Pool: Reserved for employees
- Founder Vesting: Schedule for founders
- Pro-rata Rights: Right to maintain ownership
Negotiation Tips
- Focus on economics and control
- Understand standard market terms
- Get experienced legal help
- Don’t optimize for valuation alone