Why term sheet matters to a first-time founder
Signing a term sheet sets the shape of your company before any lawyer drafts the full documents. Reopening valuation, board seats, liquidation preferences or vesting afterwards looks like bad faith, so what you accept here usually ends up in the final contracts. Exclusivity can also stop you talking to other investors for several weeks. Founders who focus only on the headline valuation often find later that control and exit terms cost them more than a lower price would have.
Examples of term sheet
A term sheet of two pages sets out an investment of ₦100 million, the pre-money valuation, the percentage being sold, a board seat, and a vesting schedule for the founders. You negotiate those points. Lawyers then turn the points you agreed into the full documents.
Common misunderstanding
People treat the term sheet as the finished contract, or as nothing more than a valuation. The valuation is one term among several. Who controls decisions, how the founders earn their shares, and what happens if the company is sold can matter just as much. Read which clauses bind before signing. “Non-binding term sheet” does not necessarily mean every sentence is optional.
When to use it
Ask for a term sheet when a conversation has turned into a real offer. Get the few points that change ownership and control onto that page before you debate a long list of smaller clauses over email.