Term Sheet
A non-binding document outlining the key economic and control terms of a proposed investment.
A term sheet lays out the core terms of a deal — valuation, amount raised, liquidation preference, board composition, protective provisions, option pool size — before lawyers draft the full binding legal documents. Most provisions are explicitly non-binding, letting either side walk away, but confidentiality and exclusivity ('no-shop') clauses are usually binding.
Signing a term sheet typically triggers an exclusivity period during which the company agrees not to solicit or negotiate with other investors, giving the lead investor room to complete diligence and finalize documents without a competing bid emerging mid-process.
The gap between a clean, founder-friendly term sheet and a dense one loaded with unusual provisions (full-ratchet anti-dilution, multiple liquidation preferences, broad protective provisions) is where a huge amount of long-term value gets negotiated — far more than in the headline valuation number.
Get an experienced startup lawyer to redline the term sheet before signing, even for a 'standard' deal — the no-shop clause locks you in, so this is the last moment of real leverage before the lead investor controls the pace and terms of diligence.
Is a term sheet legally binding?
Mostly not — the economic and governance terms are typically non-binding, but confidentiality and exclusivity (no-shop) clauses usually are, so signing does have real legal consequences.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.