Term sheet

Also called Heads of terms, Letter of intent, LOI

A short summary of the deal, mostly not legally binding, which nonetheless decides almost everything.

What it means

A term sheet sets out the principal terms of a proposed investment or acquisition before the full legal documents are drafted: price, structure, what each side gets, key conditions and timetable.

Most of it is expressed as non-binding. Some parts — exclusivity, confidentiality, costs — usually are binding, and it is worth knowing which.

Why it matters

In practice the term sheet settles the deal. Once signed, reopening a point is possible but costly, and the party who wants to reopen it is the one who looks difficult.

Exclusivity is the clause that changes your position most: it stops you talking to anyone else for a period, which removes your competitive leverage at exactly the moment due diligence begins.

What it looks like in practice

Get advice on the term sheet, not on the long-form documents. Founders routinely do it the other way around and pay for lawyers to argue about points they already conceded.

The terms that matter beyond price: liquidation preference and whether it participates, board composition, investor consent rights, anti-dilution, and founder vesting.

A 1x non-participating preference is standard and reasonable. Participating preferences and multiples are not, in most ordinary rounds.

What to watch out for

Long exclusivity periods. Thirty to sixty days is usual; six months hands over the negotiation.

Consent rights drafted so broadly that ordinary trading decisions need investor approval.

"This is our standard document." Every document is somebody's standard document.

Where to get proper advice

A corporate solicitor who does venture or M&A deals specifically, engaged before you sign the term sheet.