# What is Term Sheet? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Legal  
> **Canonical Citation:** [https://spidits.com/startup-glossary/term-sheet](https://spidits.com/startup-glossary/term-sheet)

## Definition
A Term Sheet is a non-binding agreement that outlines the key financial and legal terms of a proposed investment round.

## Architectural Mechanics & Deep Dive
A Term Sheet is a non-binding agreement that outlines the key financial and legal terms of a proposed investment round. It covers critical parameters such as pre-money valuation, investment amount, board composition, liquidation preferences, voting rights, and protective provisions. Once signed, the term sheet serves as the blueprint for drafting the binding definitive legal agreements (like the Stock Purchase Agreement).

## Industry Applications & Real-World Use Cases
Deal structure negotiations between startup and VC

## Frequently Asked Questions

### Is a term sheet legally binding?
Generally no, except for specific clauses like confidentiality and exclusivity. It serves as a blueprint for binding legal agreements.

### What are the most critical terms in a term sheet?
Valuation, investment amount, board control, liquidation preference, voting rights, and anti-dilution protections.

## Related Terminology
- [venture-capital](https://spidits.com/startup-glossary/venture-capital)
- [liquidation-preference](https://spidits.com/startup-glossary/liquidation-preference)
- [due-diligence](https://spidits.com/startup-glossary/due-diligence)

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*From the SPIDITS AI Knowledge Base (311+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*