Deal papers and endings
Term sheet
The short document setting out the commercial terms of an investment or a transaction before the full paperwork is drafted. In a funding round it names the amount, the valuation basis, the share class and its rights, the board arrangement, and the protections the investor is asking for. Like a letter of intent, it is mostly non-binding with named exceptions — usually confidentiality, exclusivity and costs — and it exists so that the expensive drafting starts from an agreed position.
- In the catalogue
- Deal papers and endings
- Where it can live
- Any of the 184 governing laws
Who uses one
- Founders and investors agreeing a round before definitive documents.
- Buyers and sellers summarising the terms of an acquisition.
- Any party who wants the commercials settled before lawyers begin.
What you are deciding
- The amount, and what is being issued or bought
- The valuation basis
- The rights attaching to what is issued
- Board composition and who appoints whom
- Which decisions need investor consent
- Founder commitments such as vesting
- Conditions to completion, and the timetable
- Which terms are binding, and whether there is exclusivity
Blanks you leave stay blank and wait in the room. Nothing is filled in from a guess.
The sections a draft usually has
- 1The parties and the transaction
- 2Amount and instrument
- 3Valuation
- 4Rights attaching
- 5Board and governance
- 6Consent matters
- 7Founder commitments
- 8Conditions and timetable
- 9Exclusivity, confidentiality and costs
- 10Binding and non-binding parts
A general outline, not a required one. What turns up in a draft follows what you described. A contract is written in the order a contract is read.
What people call it
The names this kind of paper goes by. They are here because people search for them. They also filter the catalogue. They are not a wordlist the door matches. At the composer you describe the deal in your own words instead.
- term sheet
- investment term sheet
- funding term sheet
- summary of terms
- indicative terms
- deal terms document
Questions people ask
- Is a term sheet binding?
- Mostly not, with named exceptions such as exclusivity, confidentiality and costs. It is still treated seriously in practice, because reopening an agreed term afterwards is expensive in goodwill.
- What comes after a term sheet?
- The definitive documents — typically a subscription or purchase agreement and a shareholders' agreement — drafted to reflect what the term sheet already settled.
- Why agree terms before the long documents?
- Because drafting is slow and expensive. Settling the commercials on two pages means the negotiation happens once rather than clause by clause across a hundred.
General answers about the document. Not advice about your situation. Not written about any one country.
Where it lives
A contract names the legal system it is governed by. That is a separate decision from which paper it is. You pick it at the door, from any of the 184 units in Governing law, including England and Wales, Delaware, California and New York.
You do not start from this page. Describe the deal in one sentence at the door. Read the draft back in plain language, in the order a contract is read.
Start it at the door →Related kinds