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ACADEMY: What is a term sheet?

Posted by Tanya Prive on Jul 1, 2016 11:00:00 AM

 

A term sheet is a non-binding agreement that outlines the basic terms of an investment. Think of it as a plain English version of the subscription documents and purchase agreement. Term sheets provide a simple, inexpensive template for the lawyers to follow as they create the more detailed deal documentation. Once the term sheet has been agreed upon between the founders and investors, the lawyers can begin the often expensive process of drafting the deal documentation. Although they are legally non-binding, trying to re-negotiate or remove terms agreed to in the term sheet is considered very unprofessional. But be aware, it can happen and there is no legal recourse. So a “signed term sheet” is more of a gentleman's handshake than a legally binding document.

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Topics: Venture Investing Academy