Term sheet

A term sheet is the short, mostly non-binding document an investor sends to outline the key terms of a proposed investment before the full legal paperwork is drawn up. It sets out the amount, the valuation, and the economic and control terms: liquidation preferences, board seats, option pool, anti-dilution, and the like. Although it's not the final contract, the term sheet is where the real negotiation happens, because the lawyers mostly just translate it into binding documents afterwards. For a lean founder, the danger is fixating on the valuation headline while waving through the control and preference terms that decide who actually runs the company and who gets paid first in an exit. A high valuation wrapped in a participating preference and a board you don't control can be worse than a lower valuation on clean terms. Read every line, understand each clause's behaviour in a bad outcome, and get a specialist lawyer before you sign anything.