Term Sheet

A term sheet is the summary document an investor sends when they decide to invest in your startup. It lists the most important terms of the deal — how much they're investing, at what valuation, and what rights they get — before lawyers draft the full Shareholders' Agreement (SHA) and Share Subscription Agreement (SSA).

Term sheets are typically non-binding except for two clauses: exclusivity (you can't talk to other investors for 30–60 days) and confidentiality. Everything else is subject to due diligence and negotiation.

Key sections: valuation and investment amount, security type (equity, CCPS, CCD), board composition, liquidation preference, anti-dilution protection, pro-rata rights, information rights, and drag-along/tag-along provisions.

Indian term sheets almost universally use Compulsorily Convertible Preference Shares (CCPS) rather than common equity, because CCPS gives investors structural protection under Indian company law. This is different from US term sheets which use convertible preferred stock with similar economics but different legal structure.

SEBI's Alternative Investment Fund (AIF) regulations affect how VC funds must structure their investments, which flows into term sheet design. Indian term sheets from institutional VCs typically run 8–12 pages; angel term sheets can be 2–3 pages.