Startup
Term Sheet Format & Template
Term Sheet is a guided template for recording relevant details and terms in writing. Review the document-specific execution and legal requirements before relying on a final PDF.
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What you can set in this draft
- Valuation & investment
- Instrument & ownership
- Governance & board rights
- Liquidation preference
- Binding vs non-binding terms
About this Term Sheet
A term sheet sets out the key commercial terms of a proposed investment or transaction before the parties draw up definitive, legally binding agreements. In the Indian startup and investment context, a term sheet is typically the first written document exchanged once an investor and a company agree, at a high level, to proceed with a funding round — it captures valuation, investment amount, the type of instrument being used, and the major rights the investor will hold, so that both sides can confirm alignment before spending time and legal fees on the full agreements.
A term sheet usually covers the pre-money and post-money valuation, the amount being invested and the instrument used (equity shares, compulsorily convertible preference shares, or a convertible note), board composition and observer or information rights, protective/veto provisions on major company decisions, liquidation preference (the order and multiple in which investors are repaid on a sale or winding up), anti-dilution protection, and rights of first refusal or co-sale on founder share transfers.
Term sheets deliberately distinguish binding from non-binding terms. Commercial terms like valuation and structure are typically expressed as non-binding — an indication of intent, not a contractual commitment — while a handful of clauses are usually made binding regardless, most commonly confidentiality and exclusivity (a period during which the company agrees not to negotiate with other investors while the deal is being finalised). It's important that a term sheet says explicitly which clauses are binding and which are not, since ambiguity here is a common source of later dispute.
Because a term sheet sits ahead of the definitive agreements (share subscription agreement, shareholders' agreement, and amended charter documents), it functions as a negotiating and alignment tool rather than the final word — but it strongly shapes what the later, binding agreements will say, so founders and investors should treat its terms as something they genuinely intend to live with, not as a draft to be substantially renegotiated later.
Your next step
Start the guided draft
- 1. Answer the guided questions.
- 2. Review the watermarked draft.
- 3. See available checkout and signing options.
- Format
- Signing
- Not required
Template teaser preview
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Advantages of using this term sheet
- Lets both sides align on the key deal terms before investing time and legal fees in full agreements
- Clearly separates binding terms (confidentiality, exclusivity) from non-binding commercial terms
- Sets expectations on valuation, instrument, governance rights, and investor protections early
- Speeds up drafting of the definitive agreements since the major terms are already agreed
- Reduces the risk of late-stage disagreement on fundamental deal structure
What this document covers
- State the pre-money and post-money valuation and the total investment amount
- Specify the instrument being used — equity shares, compulsorily convertible preference shares, or convertible notes/debentures
- Set out board composition, observer rights, and information rights the investor will hold
- List protective provisions requiring investor consent for specified major company decisions
- State the liquidation preference — the multiple and order of repayment on a sale, merger, or winding up
- Address anti-dilution protection and any rights of first refusal or co-sale over founder shares
- Mark clearly which clauses (typically confidentiality and exclusivity) are binding, and which are non-binding statements of intent
- Set a validity period for the term sheet and the exclusivity window during which the company will not negotiate with other investors
Applicable laws
A term sheet is generally governed by the Indian Contract Act, 1872 for whichever of its clauses are stated to be binding — commonly confidentiality and exclusivity. The definitive agreements that follow (share subscription agreement, shareholders' agreement) are shaped by the Companies Act, 2013, and if foreign investment is involved, by the Foreign Exchange Management Act, 1999 (FEMA) and applicable RBI/FDI regulations. Where preference shares are used as the investment instrument, the Companies Act's provisions on share capital and preference shares apply once the definitive documents are executed. A term sheet itself does not usually require stamping or registration, since it is generally non-binding as to the commercial terms and is superseded by the definitive, stamped agreements. Founders and investors should not treat a signed term sheet as equivalent to a completed investment — funds are only legally committed once the definitive agreements are executed and, where applicable, regulatory conditions (such as FEMA compliance for foreign investment) are met.
Founders should have a lawyer review even a "non-binding" term sheet before signing, since its terms strongly influence the definitive agreements that follow.
Frequently asked questions
What is a Term Sheet used for?
A term sheet sets out the key commercial terms of a proposed investment or transaction before the parties draw up definitive, legally binding agreements. In the Indian startup and investment context, a term sheet is typically the first written document exchanged once an investor and a company agree, at a high level, to proceed with a funding round — it captures valuation, investment amount, the type of instrument being used, and the major rights the investor will hold, so that both sides can confirm alignment before spending time and legal fees on the full agreements.
What does a Term Sheet typically cover?
A Term Sheet typically covers State the pre-money and post-money valuation and the total investment amount, Specify the instrument being used — equity shares, compulsorily convertible preference shares, or convertible notes/debentures, Set out board composition, observer rights, and information rights the investor will hold, List protective provisions requiring investor consent for specified major company decisions, State the liquidation preference — the multiple and order of repayment on a sale, merger, or winding up, Address anti-dilution protection and any rights of first refusal or co-sale over founder shares, Mark clearly which clauses (typically confidentiality and exclusivity) are binding, and which are non-binding statements of intent, and Set a validity period for the term sheet and the exclusivity window during which the company will not negotiate with other investors.
What formalities apply to a Term Sheet?
A term sheet is generally governed by the Indian Contract Act, 1872 for whichever of its clauses are stated to be binding — commonly confidentiality and exclusivity. The definitive agreements that follow (share subscription agreement, shareholders' agreement) are shaped by the Companies Act, 2013, and if foreign investment is involved, by the Foreign Exchange Management Act, 1999 (FEMA) and applicable RBI/FDI regulations. Where preference shares are used as the investment instrument, the Companies Act's provisions on share capital and preference shares apply once the definitive documents are executed. A term sheet itself does not usually require stamping or registration, since it is generally non-binding as to the commercial terms and is superseded by the definitive, stamped agreements. Founders and investors should not treat a signed term sheet as equivalent to a completed investment — funds are only legally committed once the definitive agreements are executed and, where applicable, regulatory conditions (such as FEMA compliance for foreign investment) are met.
How long does a Term Sheet take to complete?
The guided draft is estimated to take Time varies. Allow additional time to review the completed document and confirm any execution formalities.