The investor’s field guide · T
Term sheet
A summary of the proposed commercial and legal terms for an investment or financing.
Explained by the editorial team
A term sheet sets out the main points of a proposed investment. In an equity round it may cover valuation, share class, investor rights, board involvement, conditions and costs. It provides a basis for detailed agreements rather than necessarily completing the investment itself.
How to read it
Start with both the economics and the control provisions. Two offers at the same valuation can differ materially because of liquidation preferences, consent rights or option-pool changes. Check the cap table before and after the proposed transaction.
What to examine
Some clauses may be immediately binding even when the investment terms are not. Confidentiality, exclusivity and costs are common areas to examine closely. The document’s title does not determine its legal effect. Understand conditions such as satisfactory due diligence and whether either side can withdraw. UK and US practices differ, and templates are not universally interchangeable. Have qualified advisers explain the complete bargain before signing or committing funds.
General information, not investment, legal or tax advice. Examples are illustrative. Read the disclaimer.