A “Term Sheet” is a document that investors will (hopefully) send to us that summarizes the key terms and provisions of their investment. The obvious terms are things like the amount they will invest and the valuation of our startup.

The less obvious terms are things that are designed to “protect” the investor when things go wrong – which they usually do.

Here’s what we’ll cover in this lesson:

• Terms of Investment. Amount, Valuation and ultimately our Dilution.
• Stock Option Pool. Stock to be set aside for future employees.
• Founder Vesting. We’ll often be asked to give our stock back and have to earn it over a period of years.
• Preferences. Terms that allow the investor to recoup their investment before anyone else.
• Control Rights. What aspects of our business will require a majority vote to approve.

It can sound like a lot but we’ll cover each in detail so you’ll at least know what to expect and have a general understanding of what these terms mean.

Everything else will be for the lawyers to explain!