Term sheet

A term sheet is the starting document in any equity fundraise. It captures the headline deal terms — valuation, investment amount, instrument type, governance rights, and exit mechanics — in a concise, readable format before lawyers begin drafting the full legal agreements. The term sheet itself is almost always non-binding (with limited exceptions such as exclusivity and confidentiality clauses), meaning either party can walk away before signing the final documents.

For a founder, the term sheet is the single most important document to scrutinise in a fundraise. Every clause that slides through unchallenged here will resurface, legally enforceable, in the Shareholders' Agreement and Share Subscription Agreement. Common pressure points include liquidation preference stacks, anti-dilution mechanics, board composition, and information rights.

In Indian practice, term sheets are typically issued by the lead investor after initial due diligence. They are signed by both parties to signal mutual intent, with a 30–60 day exclusivity window during which the founder cannot solicit competing offers. Signing does not close the deal — full legal due diligence and definitive documents follow.

Negotiating a term sheet founder-friendlier is far easier than trying to renegotiate terms embedded in a signed SHA. Founders should engage a startup-experienced lawyer at term sheet stage, not after.