What a term sheet is, and is not
It is short, it is mostly non-binding, and it sets the shape of everything that follows.
By Alina Voss, 12 Feb 2026. 6 minute read. Formation and financing. Fictional author and date.
A is a conversation written down. It sets out the main terms on which an investor is willing to invest, in a few pages, before anyone pays for the long documents.
Most of it does not bind. Price, amount and rights describe what the parties intend to put in the final contracts. A few parts usually do bind: , the cost of the process, and , which keeps you from negotiating with others for a period.
“A term sheet is a conversation written down.”
Read the exclusivity clause twice. Thirty days is common in examples like this one; ninety days is a long time to be unable to talk to anyone else.
The headline number is the , but it is rarely the only number that matters. The size of the set aside for future hires is often counted before the investment, which means it comes out of the existing owners’ share.
A good habit: write the term sheet in your own words, in five lines, and check that the investor agrees with your five lines.
What this does not cover. This article does not cover tax, or the rules of any one country. It is not advice on your situation.
Terms used in this article
- Term sheet. A short summary of the main terms of an investment, written before the long documents. Mostly non-binding.
- Confidentiality. A promise not to share what you learn during the deal. This part usually binds even if the deal does not close.
- Exclusivity. A promise not to negotiate with other investors for a set period. It usually binds.
- Valuation. The agreed worth of the company used to set the price of the shares. It is an agreement, not a measurement.
- Option pool. Shares set aside to give employees later, as options. Whether it is counted before or after the investment changes who bears its cost.