The term sheet is the document that turns interest into a deal: a few pages from the lead investor summarizing the terms on which they propose to invest. It is signed before due diligence completes and before definitive documents are drafted, and it is mostly non-binding, a statement of intent rather than a contract, with 2 customary exceptions that do bind: exclusivity (the no-shop, typically 30 to 60 days) and sometimes expense provisions.
Its content splits into 2 families. Economics: valuation, round size, option pool, liquidation preference, anti-dilution. Control: board composition, protective provisions (the list of decisions requiring investor consent), information rights, founder vesting. Founders negotiate economics by instinct; experienced counsel earns its fee on control, where a clause costs nothing today and everything at the wrong board meeting.
Mostly non-binding does not mean low stakes. Signing locks the company into exclusivity while diligence runs, so the negotiation leverage peaks the day before signature and, for most companies, decays after. Re-trading, a lead worsening terms after diligence, happens; the defenses are a clean data room, references on the fund’s behavior in past deals, and not burning the runway to the point where walking away is impossible.