Other attributes
A term sheet is not a promise to invest. It's a contract that typically provides for confidentiality and temporary exclusivity and sets out the main parameters of the investment. Term sheets are on-binding agreements which set the fundamental terms and conditions for making investments. A Term sheet is similar to, but not the same as, a letter of intent (LOI) and a memorandum of understanding (MOU).
Entrepreneurs often create term sheets when they are trying to raise capital for their company, or startup, from venture capitalists. Venture capitalists and entrepreneurs use term sheets to form non-binding understandings of the valuation of the company, the amount of money being invested, the percentage stake given for the investment, anti-dilutive provisions, clarification of voting rights, liquidation preferences, and investor commitments. It is always important to remember that the terms of a term sheet are not legally binding, and both parties involved are not legally obligated to abide by any of the terms outlined in a term sheet.
