deal-structures
A term sheet is a concise statement of the economic and control terms of a proposed investment or acquisition. In venture it is the main pre-definitive document; in M&A it often overlaps with a letter of intent.
Venture capital uses term sheets as the primary handshake: pre-money valuation, amount, preferred shares, liquidation preference, board, protective provisions. The NVCA publishes model legal documents that many U.S. (and increasingly European) rounds still resemble.
Private equity buyouts more often speak of an LOI or process letter, then jump to a full SPA. Growth-equity minority deals sit in between: a term sheet that looks like venture, with covenants that look like buyout.
M&A sell-side auctions may issue a process letter rather than a term sheet, then collect marked-up SPAs.
Economics (price, amount, instrument), structure (equity, convertible note, debt financing), governance, conditions, exclusivity, and fees. Binding versus non-binding follows the same drafting logic as a letter of intent.
A Series B term sheet: €8m on a €32m pre-money, 1× non-participating preferred, broadly-based weighted-average anti-dilution, two investor directors, and a 20% option pool refresh carved from pre-money. The cap table impact is the story. The legal documents will run 80 pages; the argument happened on two.
Founders care about dilution and control. Funds care about downside protection and information rights. Corporates care about exclusivity, IP assignment and whether the term sheet accidentally creates a partnership.
Agreeing a headline valuation without specifying option-pool treatment. Leaving the conversion mechanics of a note to “standard terms.” Treating a signed term sheet as if closing were a formality.
A term sheet cannot cure a broken business. It also cannot replace due diligence. In some jurisdictions, “agreements to agree” still create duties of good faith.
Term sheets should inherit valuation and ownership data from a living cap table and financial layer. When those objects are scattered, every mark-up becomes a reconciliation project.