A term sheet records the financial terms and governance provisions an investor proposes before legal documentation begins. Founders reviewing their first term sheet often mistake the document for a final agreement. It is not binding in most respects. The real negotiating starts once founders understand every clause.
This template lists every standard provision, explains what each one means, and shows how terms shift when companies grow past Seed stage.
What belongs in a term sheet
Two categories carry every term sheet provision. Financial terms set the price and share class. Governance provisions determine control rights after the money counts. Both matter equally during negotiation.
| Category | What it covers | Typical examples |
|---|---|---|
| Financial terms | Share class, price per share, total raised, pre-money valuation | Preference shares, liquidation preferences, dividend terms |
| Governance | Board composition, information rights, protective provisions | Board seat allocation, veto rights, quorum requirements |
| Founder protections | Vesting schedules, transfer restrictions, non-compete terms | Four-year vesting with one-year cliff, right of first refusal |
| Information rights | Reporting frequency, audit rights, data access | Annual budget approval, quarterly management accounts |
Founders should review every line item. Investors expect some pushback on governance and founder protection clauses, even if they rarely object to financial terms already reflected in the chosen valuation.
The seven clauses founders most often get wrong
This interactive tool is in development.
How Seed term sheets differ from Series A
Series A term sheets introduce complexity absent from Seed documentation. Three elements change most noticeably.
| Provision | Seed typical | Series A shift |
|---|---|---|
| Liquidation preference | One-times non-participating | May become participating at 1x |
| Board seats | Two founders, one investor, one independent | Three investor-aligned, two founder-aligned |
| Option pool | 10% post-money common | Often expanded to 15%, created pre-close |
| Audit rights | Rarely included | Standard inclusion requiring audited accounts |
Each shift reflects increased institutional involvement. Terms evolving from friendly negotiations toward formalised corporate governance signals healthy maturation rather than negative developments.
Frequently asked questions
A term sheet records the financial terms and governance provisions an investor proposes before legal documentation begins. Most provisions remain non-binding. The actual negotiating starts once founders understand every clause and its commercial implications.
Legal fees for a UK Seed term sheet range between £2,000 and £5,000 depending on firm seniority and complexity. Series A legal work costs significantly higher, typically £8,000 to £20,000 per side. Lucy Colson reviews term sheets through Capital Studio, reducing legal spend through earlier identification of problematic provisions.
Accept a term sheet once all material terms align with expectations and legal counsel confirms compliance with UK corporate law. Signatures trigger exclusivity periods lasting thirty to sixty days, preventing concurrent negotiations with competing investors throughout this period.
Most UK term sheets contain binding exclusivity provisions alongside non-binding substantive terms. Exclusivity prevents founders from negotiating with other investors during the defined period. Everything else remains negotiable until executed share subscription agreements replace the term sheet.
Yes. Investors expect pushback on governance clauses and founder protection terms. Negotiation on financial terms such as valuation reflects market consensus, while governance terms involve structural considerations requiring careful analysis.
Next step
Review your specific terms with Lucy Colson through Capital Studio, costing £500 per month without equity or success fees. Every term sheet received during an active engagement receives prompt review within twenty-four hours.