What is a term sheet?

A term sheet is the short, mostly non-binding document in which an investor proposes the terms of an investment: valuation, amount, liquidation preference, board composition, option pool, and the other key economics and controls. Signing it starts confirmatory diligence and legal drafting; the binding documents follow.

Though non-binding on economics, term sheets typically bind on exclusivity ('no-shop') and confidentiality. Reputable investors treat a signed term sheet as a commitment absent diligence surprises — an investor who retrades agreed terms is a signal in itself.