A term sheet is a non-binding document that outlines the key terms of an investment. It sets expectations before lawyers draft the final legal documents.
Think of it as a blueprint: it captures how much money is being invested, what investors get in return, and what rights both sides have.
Use SAFEs for speed. Simple 2-3 page documents with valuation cap and discount. No board seats, no complex terms.
Still SAFEs or convertible notes. Terms get tighter based on traction. Pro-rata rights become common. May see MFN clauses.
Priced equity rounds with full governance. Fixed valuation, board seats, liquidation preferences, anti-dilution, information rights. 10-15 page documents.
Investors expect negotiation. Accepting the first offer signals inexperience.
At pre-seed/seed: valuation cap, discount, pro-rata. At Series A: valuation, board composition, option pool size.
Research what is standard. Point to norms when investors propose unusual terms.
Do not negotiate one term at a time. Offer trade-offs that show you understand the dynamics.
Decide what is non-negotiable before you start. Bad terms hurt for years.
Pitchkit helps you understand term sheets, model dilution, and identify red flags before you sign.