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by Undo Capital
December 15, 2025
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What Is a Term Sheet?

A term sheet is a non-binding document that outlines the key terms, valuation and investment structure agreed between a startup and an investor before final contracts are drafted.

Term Sheet Meaning

The term sheet’s meaning centres on setting the framework for a funding deal. To define a term sheet in practice, it summarises crucial points such as valuation, investment amount, share class, board rights, investor protections, option pool size and any conditions precedent. Although not legally binding on most commercial terms, it guides lawyers in preparing the subscription and shareholders’ agreements. A clear term sheet definition is vital because it establishes expectations, prevents misunderstandings and accelerates negotiation. A term sheet stands for alignment, clarity and the foundation of a successful investment round.

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Disclosure Notice: This communication is issued by Undo Capital Limited (“Undo Capital”) and is provided strictly for informational purposes only. It contains general information and should not be relied upon as accounting, business, financial, investment, legal, tax, or other professional advice. Undo Capital is not regulated by the Financial Conduct Authority (FCA) and does not provide investment, financial, or tax advice. Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. Nothing in this communication constitutes, or should be construed as, a recommendation, offer, or solicitation to purchase or sell any security or financial instrument.
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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.