A term sheet is a non-binding (with limited binding exceptions) summary of the principal commercial and legal terms on which an investor proposes to invest in a company. It typically runs 5–15 pages, is signed by both founders and the lead investor early in a financing process, and serves as the architectural blueprint for the long-form definitive documents that follow — usually a Stock Purchase Agreement (SPA), Investors’ Rights Agreement (IRA), Voting Agreement, and Right of First Refusal & Co-Sale Agreement, or in U.S. seed deals a SAFE or convertible note.
Despite its non-binding nature on most economic terms, term sheets typically contain binding provisions that survive even if the deal collapses: exclusivity (no-shop) for 30–90 days preventing the company from soliciting competing offers; confidentiality of the proposed terms; expense reimbursement obligating the company to cover the investor’s legal and diligence costs (capped, typically $25K–$75K for early stage, six figures for growth); and governing law and dispute resolution.
Key economic terms include: pre-money valuation and investment amount (driving founder/employee dilution); liquidation preference (1x non-participating is market for seed/Series A; participating preferred and multiples appear in later or distressed rounds); anti-dilution protection (broad-based weighted average is market; full-ratchet is investor-favorable and rare); option pool sizing (typically 10–20% post-money, often funded pre-money to dilute founders rather than the new investor); pro-rata rights for future rounds; and dividend treatment (usually non-cumulative at 6–8% if any).
Governance terms include: board composition (typical Series A is 5 seats: 2 common, 2 preferred, 1 independent); protective provisions giving preferred holders veto rights over enumerated corporate actions (sale, liquidation, charter amendments, increase in option pool, debt above thresholds, related-party transactions); information rights for major investors; and founder vesting (typically 4-year with 1-year cliff for unvested founder shares, full or double-trigger acceleration on change of control).
For Turkish founders raising from U.S./EU VCs, term sheets typically follow the NVCA template architecture with adjustments for non-U.S. cap-table specifics (often a Delaware top-co with Turkish operating subsidiary). Vircon Legal advises founders on term sheet negotiation — economic optimization (valuation, option pool gaming, preference stacking), governance protection (board control, founder vesting acceleration, protective-provision scope), and the strategic positioning required to convert lead-investor term sheets into closed financings.