Term sheet
A short, non-binding document laying out the key terms of an investment before the full legal paperwork gets drafted.
A term sheet summarizes the core economic and control terms of a financing round — valuation, amount raised, board seats, liquidation preference, pro-rata rights — in a few pages, before lawyers draft the full binding legal documents. Most terms are non-binding (either side can walk away), though confidentiality and exclusivity clauses typically are binding.
For priced equity rounds, the term sheet is the document worth spending real time on: once signed, it sets the frame that the full legal paperwork will follow, and renegotiating a point after the term sheet is agreed is far harder than getting it right the first time.
Why it matters
As an angel, you'll rarely negotiate a term sheet yourself at seed stage (SAFEs mostly skip this step) — but understanding one matters the moment you're looking at a priced round, or evaluating how favorable a fund's own terms with its portfolio companies are.