Term sheet

A term sheet (lettre de conditions) is a non-binding document (except for specific exclusivity and confidentiality clauses) summarising the principal economic and legal terms of a proposed investment or acquisition before definitive documents are drafted. In fundraising, the term sheet covers: pre-money valuation, investment amount, share type, liquidation preference, anti-dilution mechanism, governance rights, founder vesting and exit rights. Its negotiation precedes the shareholders' agreement — and because it sets the economic framework for all subsequent documentation, it is often the most important document in the entire fundraising process.

‍

Example: a Swiss VC fund submits a Series A term sheet for CHF 4.0 million at a CHF 12.0 million pre-money valuation: 1x non-participating liquidation preference, broad-based weighted average anti-dilution, 1 board seat of 5, veto rights on decisions above CHF 1.0 million, 30-day exclusivity for shareholders' agreement negotiation. Post-money valuation: CHF 16.0 million, fund receives 25% of capital. Each economic term has significant implications — modelling every exit scenario before signing is essential.

‍

Hectelion supports founders and investors in term sheet negotiation, modelling the economic implications of every clause across all exit scenarios before commitment.