Term Sheet

AAA

DEFINITION of 'Term Sheet'

A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is then drawn up.

INVESTOPEDIA EXPLAINS 'Term Sheet'

A term sheet lays the groundwork for ensuring that the parties involved in a business transaction are in agreement on most major aspects of the deal, thereby precluding the possibility of a misunderstanding. It also ensures that expensive legal charges involved in drawing up a binding agreement or contract are not incurred prematurely.

They generally cover the more important aspects of a deal, without going into every minor detail and contingency covered by a binding contract. For example, a term sheet from a venture capital company that is investing in an early-stage company may contain such details as the amount of investment, the percentage stake sought, anti-dilutive provisions and valuation.

RELATED TERMS
  1. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  2. Angel Investor

    An investor who provides financial backing for small startups ...
  3. Fine Print

    Contract terms and conditions, disclosures or other important ...
  4. Seed Capital

    The initial capital used to start a business. Seed capital often ...
  5. Staple Financing

    A pre-arranged financing package offered to potential bidders ...
  6. Donation-based Crowd Funding

    Donation-based crowdfunding is a way to source money for a project ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Entrepreneurship

    How Venture Capitalists Make Investment Choices

    In order to increase your odds for receiving funding, here are some criteria considered by venture capitalists.
  2. Investing Basics

    How To Invest In Private Companies

    It can be tough to invest in a company that doesn't trade on an exchange, but there are also several advantages.
  3. Mutual Funds & ETFs

    How To Invest In Private Equity

    Private Equity might be a pricey investment, but returns are on the rise and the payoff could be big.
  4. Options & Futures

    When Your Business Needs Money: Angel Investors

    If you have a promising business that needs a boost, you may be able to put your faith in these wealthy investors.
  5. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  6. Entrepreneurship

    Go To College Or Become An Entrepreneur?

    The rising cost of higher education and high unemployment rate following the Great Recession has caused many young people to question the value of college.
  7. Entrepreneurship

    How to Make Money with YouTube

    YouTube is the third most visited site in the world, and numerous people are making money thanks to the site's popularity. Here's how you can do it.
  8. Investing

    What is Asset Management?

    In the investment world, asset management refers to active management of an investor’s portfolio by a financial services company – usually an investment bank.
  9. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...
  10. Professionals

    What are Core Competencies?

    Core competencies are the essence of what a company does well. A business uses its core competencies to make and develop products, goods and services according to its company mission. Core competencies ...

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center