Investment Term Sheet Template
Hand-drafted investment term sheet template for 2026 — covering pre-money and post-money valuation, liquidation preference, anti-dilution, pro rata rights, board composition, drag-along, founder vesting and the binding vs non-binding clauses that catch first-time founders out. Variants for SAFE, convertible note, Series Seed and Series A rounds in both NVCA (US) and BVCA (UK) styles. Download today as PDF, Word or Google Docs.
Download Template See what’s inside →Quick answer. An investment term sheet is a short document — typically 4-10 pages — that outlines the principal terms on which an investor proposes to invest in a company. It covers the deal economics (amount, valuation, security type), investor rights (information, pre-emption, anti-dilution, board seats), governance (board composition, protective provisions), founder commitments (vesting, lock-in, leaver provisions), and the conditions and process to closing (exclusivity, due diligence, definitive documents). Most clauses are non-binding, but exclusivity, confidentiality and expenses typically bind from signing. The template below covers SAFE, convertible note, Series Seed and Series A variants, in both NVCA (US) and BVCA (UK) styles. Download as PDF, Word or Google Docs.
What is an Investment Term Sheet?
An investment term sheet is a short document — typically 4-10 pages — that outlines the principal terms on which an investor proposes to invest in a company. It is the document that turns a verbal handshake into a written negotiating baseline. Most of the term sheet is non-binding, expressing intent only until the definitive documents (subscription agreement, shareholders' agreement, articles or charter) are signed. A few clauses — typically exclusivity, confidentiality, expenses and governing law — are binding from the moment of signing.
Term sheets matter because every concession made at term sheet stage is very hard to claw back later in legal drafting. If the term sheet says "1x participating preferred liquidation preference", the definitive documents will reflect that, and the founders will spend their political capital on issues lower down the negotiating priority list. Get the term sheet right and the rest of the deal flows; get it wrong and the company carries the consequences for the rest of its life. The market reference points are the model documents from NVCA (US) and the BVCA (UK), with deviations from those models flagging as either founder-friendly or investor-friendly.
Key Components of an Investment Term Sheet
- Parties — the company, the lead investor and any co-investors
- Deal economics — round size, pre-money valuation, post-money, price per share
- Security type — preferred shares, ordinary, SAFE or convertible note
- Liquidation preference — multiple, participation, seniority
- Anti-dilution — broad-based weighted average, narrow-based or full ratchet
- Investor rights — information, pre-emption, ROFR, co-sale
- Board composition — founder, investor and independent seats
- Protective provisions — investor consent rights at company and board level
- Founder commitments — vesting, leaver provisions, non-compete, non-solicit
- Conditions to closing — due diligence, regulatory consents, key-person hires
- Exclusivity and expenses — usually binding clauses
- Signatures — both parties sign and date
Term Sheet vs Letter of Intent vs Definitive Documents: When to Use Each
| Factor | Term Sheet | Letter of Intent (LOI) | Definitive Documents |
|---|---|---|---|
| Purpose | Outline principal terms of investment | Express intent and high-level deal framework | Legally enforce the deal |
| Length | 4-10 pages | 2-4 pages | 50-200+ pages across multiple documents |
| Detail Level | All major commercial terms | Headline terms only (price, structure, timing) | Full legal drafting, schedules, warranties |
| Binding? | Mostly non-binding; specific clauses binding | Mostly non-binding; can be wholly non-binding | Fully legally binding |
| Typical Use | Equity investment rounds (Seed, Series A+) | Acquisition discussions, partnership talks | All signed deals, post-term-sheet |
| Drafted By | Lead investor (with founder counter-proposals) | Either party | Lead investor counsel; company counsel reviews |
In equity investment practice, the standard sequence is: (1) lead investor sends initial term sheet, (2) founder negotiates and counter-proposes, (3) signed term sheet establishes negotiating baseline, (4) due diligence runs in parallel with definitive document drafting, (5) definitive documents signed at closing. The term sheet does the heavy commercial work; the definitive documents do the heavy legal work. Letters of Intent are more common in M&A and partnership contexts than in venture investment.
What a Term Sheet Adds Over an LOI
- Specific liquidation preference, anti-dilution and conversion mechanics
- Detailed board composition and protective provisions
- Founder vesting, leaver provisions and non-compete obligations
- Pre-emption, ROFR, drag-along and tag-along rights
- Conditions to closing, exclusivity period, expenses arrangements
- Specific binding vs non-binding provisions section
Which Type of Term Sheet Do You Need?
The right term sheet depends on three questions: priced equity or convertible instrument, what stage the round is, and whether the lead investor sets the style (UK/BVCA or US/NVCA). The decision tree below walks through it.
Most rounds follow this sequence: pre-seed and seed start with SAFEs or convertible notes, the first priced round (Series Seed or Series A) brings full preferred-share rights, and subsequent rounds re-use the same drafting style. Lead investor jurisdiction determines style — a UK lead will use BVCA, a US lead will use NVCA. Cross-border rounds (US lead into UK company, or vice versa) require careful structuring to reconcile the two frameworks.
Legal & Commercial Framework: UK and US
United Kingdom
UK term sheets are governed primarily by the Companies Act 2006 and the company's own articles of association. The market reference standard is the model documents published by the British Private Equity and Venture Capital Association (BVCA), which provide template term sheets, articles, subscription agreements and shareholders' agreements for English-law venture deals. Most UK rounds use English law preferred shares (rather than ordinary shares with a shareholders' agreement only) for institutional-stage deals.
Two UK-specific factors regularly affect term sheet drafting. First, SEIS and EIS tax reliefs are widely used at seed stage, and the rules require the issued shares to be ordinary shares with no preferential rights to assets or dividends — this constrains the rights an investor can take when SEIS/EIS is in play. Second, the FCA-regulated financial promotion regime applies to fundraising communications; institutional and HNW investors fall within standard exemptions, but founder-led friends-and-family raises need to navigate this carefully.
United States
US term sheets reference the model documents published by the National Venture Capital Association (NVCA), which include a standard term sheet, certificate of incorporation, voting agreement, investors' rights agreement, and right of first refusal & co-sale agreement. Most US venture deals use Delaware C-corp preferred stock, with the deal structure built around the certificate of incorporation (charter) and the four NVCA documents.
US securities law also applies. Most private-company offerings rely on SEC Regulation D (specifically Rule 506(b) for institutional offerings or Rule 506(c) for accredited-investor-only offerings with general solicitation permitted). State-level "blue sky" filings are required in addition to federal. For SAFEs and convertible notes, the same exemption framework applies. Y Combinator's post-money SAFE is the de facto US standard for pre-priced rounds.
Key Compliance Anchors
- UK: Companies Act 2006 framework; articles of association as primary constitutional document
- UK: BVCA model documents as drafting reference; English law preferred shares standard from Series A
- UK: SEIS / EIS constraints if tax reliefs are in play (ordinary shares only, no preferential rights)
- UK: FCA financial promotion regime for fundraising communications
- US: Delaware C-corp preferred stock standard for venture deals
- US: NVCA model documents as drafting reference
- US: SEC Regulation D Rule 506(b) or 506(c) exemption framework
- US: State-level "blue sky" filings in addition to federal Form D
- Both: Term sheet binding clauses (exclusivity, confidentiality, expenses) must be flagged explicitly
- Both: Cross-border rounds require careful structuring to reconcile UK and US frameworks
Types of Investment Term Sheet
| Type | Stage | Security | Best For |
|---|---|---|---|
| SAFE Term Sheet | Pre-seed, seed | SAFE (Simple Agreement for Future Equity) | Fast, low-cost, no valuation; small pre-seed and seed cheques |
| Convertible Note Term Sheet | Pre-seed, seed, bridge | Convertible debt with interest and maturity | Bridge rounds, situations where debt-like protections matter |
| Series Seed Term Sheet | Seed (priced) | Preferred shares, simplified rights | Institutional seed rounds with simplified protective provisions |
| NVCA Series A Term Sheet (US) | Series A and beyond | Delaware C-corp preferred stock | US-led institutional rounds; Delaware standard |
| BVCA-Style Term Sheet (UK) | Series A and beyond | English law preferred shares | UK-led institutional rounds; English law standard |
| SEIS / EIS Term Sheet (UK) | Pre-seed, seed | Ordinary shares (SEIS/EIS-compatible) | UK rounds claiming SEIS or EIS investor tax relief |
| Bridge / Extension Term Sheet | Between rounds | SAFE, convertible note or follow-on preferred | Top-up before next priced round; pro rata exercise rounds |
Choosing Between Types
- SAFE vs convertible note: SAFEs are simpler (no interest, no maturity); convertible notes add interest and maturity but treat the investor more like a debt-holder. Convertibles are more common in the UK; SAFEs in the US
- Pre-priced vs priced: Stay convertible (SAFE / note) for very early rounds where setting a valuation is hard or expensive; switch to priced equity once the company has clear revenue, traction or institutional interest
- NVCA vs BVCA: Lead investor jurisdiction determines style; cross-border rounds usually adopt the lead investor's standard with local-law adaptations
- SEIS / EIS: If the round qualifies and investors want the relief, structure as ordinary shares with no preferential rights — you trade investor protection for tax relief, and that trade is usually worth it for early-stage UK rounds
What's Inside the Term Sheet Template
The template is structured the way a venture lawyer would draft it — eight sections covering the parties, deal economics, security type and rights, governance, founder commitments, conditions, exclusivity and signatures. Easy to adapt for SAFE, convertible note, Series Seed or Series A rounds.
1. Parties & Company
- Company name, address, jurisdiction
- Lead investor and co-investors
- Existing shareholders participating
- Brief business description
2. Deal Economics
- Round size and lead commitment
- Pre-money / post-money valuation
- Price per share / valuation cap
- Option pool top-up (pre or post-money)
3. Security Type & Rights
- Preferred / ordinary / SAFE / note
- Liquidation preference (1x non-participating)
- Anti-dilution (broad-based weighted avg)
- Conversion mechanics
4. Investor Rights
- Information rights (financials cadence)
- Pre-emption on future rounds
- Right of first refusal (ROFR)
- Co-sale / tag-along rights
5. Governance
- Board composition and seats
- Investor observer rights
- Protective provisions / consent rights
- Voting thresholds
6. Founder Commitments
- Founder vesting (4yr / 1yr cliff)
- Good leaver / bad leaver definitions
- Non-compete and non-solicit
- Key-person provisions
7. Conditions & Exclusivity
- Conditions to closing (DD, consents)
- Exclusivity period (30-60 days)
- Expenses (capped reimbursement)
- Confidentiality
8. Binding Clauses & Sign
- Binding vs non-binding flag
- Governing law and jurisdiction
- Both parties sign and date
- Schedule: cap-table waterfall
All sections are editable. The deal economics (Section 2) and the governance / protective provisions (Section 5) are the two areas most often customised — everything else stays consistent across rounds. Run every term sheet draft through your venture counsel before signing to catch market-vs-non-market terms.
How to Fill Out an Investment Term Sheet: Step-by-Step
Establish: Full registered company name, registered address, jurisdiction of incorporation; lead investor name, fund name, registered address; co-investors and any participating existing shareholders.
- Use the company's full registered name (matches Companies House / state-of-incorporation records)
- Include company number (UK Ltd) or EIN (US C-corp)
- Identify whether the lead investor is a fund or an SPV; name the actual entity that will sign
- Brief business description (1-2 sentences)
- Specify minimum and maximum total raise; what happens if minimum not reached
Specify: Round size, lead commitment, pre-money and post-money valuation, price per share, option pool top-up.
- State pre-money valuation explicitly — not just "valuation" or "post-money"
- Confirm post-money = pre-money + amount raised + option pool top-up if pre-money
- State price per share to at least 4 decimal places
- Address option pool: target percentage of fully-diluted post-money, included in pre or post-money
- For SAFE / convertible: state valuation cap, discount, qualified financing trigger
- Show a clean cap-table waterfall as an annex
Specify: Security class (preferred / ordinary / SAFE / note), liquidation preference, anti-dilution protection, dividend rights, conversion rights.
- Liquidation preference: 1x non-participating is market standard
- Anti-dilution: broad-based weighted average is market; full ratchet is investor-friendly
- Dividends: usually non-cumulative, when and as declared
- Conversion: voluntary at any time, automatic on qualified IPO or majority preferred consent
- If preferred is not used (SEIS / EIS), state that ordinary shares are issued and rights are limited accordingly
Specify: Board composition, observer rights, protective provisions, voting thresholds.
- Board: typical Series A is 5 seats — 2 founders, 2 investor, 1 independent
- Specify how the independent director is appointed (mutual agreement is standard)
- Observer seats: if granted, no voting rights, full information access
- Protective provisions at company level: amend articles, sell company, raise round, take debt above threshold, change exec compensation, hire/fire CEO
- Protective provisions at board level: budget approval, capital expenditure, related-party transactions
- Quorum: usually requires investor director presence for major decisions
Specify: Drag-along threshold, tag-along rights, founder vesting, leaver provisions, non-compete, non-solicit.
- Drag-along: typical threshold is majority of preferred + majority of ordinary, or two-thirds of all shares
- Tag-along: protects minority shareholders if a majority sells
- Founder vesting: 4 years with 1-year cliff is standard, retroactive to incorporation or earlier work
- Good leaver: keeps vested shares and may keep some unvested at company option (death, disability, no-fault termination)
- Bad leaver: company can buy back shares at lower of cost or fair value (gross misconduct, voluntary departure before key milestones)
- Non-compete: 12 months post-departure is the practical UK ceiling; varies by US state
Specify: Conditions to closing, exclusivity period, expenses arrangements, binding vs non-binding flag.
- Conditions: satisfactory due diligence (legal, commercial, financial), board and shareholder approvals, key-person hires, regulatory consents
- Exclusivity: 30-60 days during which the company cannot solicit competing offers
- Expenses: company typically pays investor's reasonable legal costs up to a cap (commonly GBP 30,000-75,000 for UK Series A; USD 50,000-100,000 for US)
- Binding: explicitly flag exclusivity, confidentiality, expenses, governing law as binding clauses
- Non-binding: explicitly flag the rest as non-binding expression of intent only
Execute: Both parties sign and date; binding clauses take effect immediately; lawyers draft definitive documents over 4-8 weeks.
- Use DocuSign, Adobe Sign or HelloSign for electronic execution
- Both parties retain a signed copy
- The term sheet becomes the negotiating baseline for the definitive documents
- Lawyers draft the subscription agreement (UK) / stock purchase agreement (US), shareholders' agreement, and revised articles or charter
- Run formal due diligence: data room, financial review, legal review, customer references
- Closing typically 4-8 weeks from term sheet signing
Critical Success Factors
- Always negotiate pre-money — not just "valuation"
- Always confirm whether the option pool top-up is in pre-money or post-money — this is the single biggest dilution lever
- Always have your own venture counsel review (not the lead investor's counsel) before signing
- Always flag binding clauses explicitly — exclusivity, confidentiality, expenses
- Always think two rounds ahead: terms set at Series A flow through to Series B and beyond
- Don't sign without understanding every clause; if a clause is unclear, ask the lead investor's counsel to explain it
Best Practices for Investment Term Sheets
Drafting and Negotiation
- Negotiate the term sheet, not the definitive documents: Concessions are easier and cheaper at term sheet stage; lawyers will follow whatever you sign
- Anchor on market terms: Use NVCA (US) or BVCA (UK) model documents as the reference; deviations need justification
- Plain English: Term sheets should be readable in 30 minutes by a founder without legal training; if they are not, ask for redrafting
- Show the cap-table waterfall: A simple post-investment cap table as an annex prevents misunderstandings about resulting ownership
- Two-rounds-ahead thinking: Terms set at Series A propagate to Series B and beyond — don't trade favourable Series A terms for unfavourable rights you'll inherit later
Issuance and Process
- Lead investor sets the draft: Lead sends initial term sheet; founder responds with counter-proposals via comments or red-lined draft
- Speed matters: Don't sit on a term sheet for weeks — lead investors expect a counter-response within 5-10 business days
- Get your counsel involved early: Even before signing, share the draft with venture counsel for a quick review
- Walk through with co-founders and key advisors: The whole leadership team needs to understand the terms before signing
- Don't run multiple lead processes simultaneously without disclosing: Term sheets typically have exclusivity from signing; running parallel processes after signing is a contract breach
Storage and Compliance
- Cap-table software: Maintain post-investment cap table in Carta, Capdesk, Pulley or equivalent; reconcile to definitive documents at closing
- Term sheet archive: Keep signed term sheets indefinitely; they become reference material for subsequent rounds
- Side letters: Keep side letters (any individual investor terms not in the main agreement) with the term sheet and definitive documents
- Disclosure schedules: Prepare disclosure schedules during due diligence; these survive into the subscription agreement as company representations
- Annual investor updates: Most term sheets include information rights requiring monthly or quarterly investor updates — build the cadence into your operational rhythm from day one
Modern Practice in 2026
- NVCA and BVCA model documents updated regularly; reference the current version
- Y Combinator post-money SAFE is the de facto pre-priced US standard
- UK SAFEs (often called Advance Subscription Agreements / ASAs) for SEIS / EIS-compatible early rounds
- Cap-table platforms (Carta, Capdesk, Pulley) for post-closing administration and audit trail
- Electronic signature platforms (DocuSign, Adobe Sign) for execution
- Investor portals (Carta, AngelList, Vauban) for institutional fund administration
- SAFE-style "extension SAFEs" for bridge rounds between priced rounds becoming common
Common Mistakes to Avoid
Top 10 Term Sheet Pitfalls
- Not flagging binding vs non-binding clauses: Founders who think the entire term sheet is non-binding can find themselves contractually exclusive to one investor for 60 days — flag exclusivity, confidentiality and expenses explicitly
- Pre-money / post-money confusion: A "GBP 25 million valuation" can mean either pre-money or post-money — the difference is the entire round size in dilution
- Hidden dilution from option pool top-up in pre-money: A 15 percent option pool created in the pre-money is direct founder dilution; investors push for it because it does not dilute them
- Liquidation preference greater than 1x without realising the impact: A 2x preference on a GBP 5 million investment means the investor takes GBP 10 million off the top of any exit before ordinary shareholders see anything
- Participating preferred ("double dip"): The investor takes their preference AND participates pro rata in the rest — can dramatically reduce founder return on a moderate exit
- Full ratchet anti-dilution: Aggressive form that resets conversion price to any down-round price; broad-based weighted average is market
- Founder vesting reset on investment without negotiation: Investors often want fresh 4-year vesting from the date of investment; founders can negotiate retroactive credit for time already served
- Drag-along thresholds too low: A drag-along that triggers at 50 percent + 1 of preferred allows a single investor to force a sale — aim for two-thirds threshold and require ordinary share consent too
- Information rights too broad / no thresholds: Information rights without a minimum holding requirement persist forever; require holders to maintain a minimum stake to keep their rights
- Forgetting deal-bring-down conditions: Specify what happens if a major fact discovered in DD changes the deal — price adjustment? Walk-away right? — and don't let due diligence run open-ended
UK (BVCA) vs US (NVCA) Practice
Term sheet drafting style varies meaningfully between UK and US venture practice. The substantive economics are similar, but the legal architecture is different because the underlying company law is different. Here is the side-by-side that matters when drafting.
United Kingdom (BVCA Style)
UK term sheets reference the model documents from the British Private Equity and Venture Capital Association. Deals are typically structured around English-law preferred shares, governed by an updated articles of association and a shareholders' agreement (sometimes called a subscription and shareholders' agreement, or SSA, which combines both). Key UK features: SEIS and EIS tax reliefs are widely used at seed stage but require ordinary shares with no preferential rights; Companies House filings (Confirmation Statement, Articles, Annual Accounts) form the public record; EMI options for staff equity require HMRC notification within 92 days.
United States (NVCA Style)
US term sheets reference the model documents from the National Venture Capital Association. Deals are typically structured around Delaware C-corp preferred stock, with the deal documented in the certificate of incorporation (charter) and four ancillary documents: voting agreement, investors' rights agreement, right of first refusal & co-sale agreement, and stock purchase agreement. Key US features: SEC Regulation D (Rule 506(b) or 506(c)) governs the federal exemption; state-level "blue sky" filings required in addition; SEC Form D filed within 15 days of first sale; Y Combinator's post-money SAFE is the de facto US pre-priced standard.
Both jurisdictions
The substantive economics — valuation, liquidation preference, anti-dilution, board composition, founder vesting — are similar across both. The differences are in legal architecture: NVCA uses Delaware preferred stock with a charter and four ancillary documents; BVCA uses English law preferred shares with articles and a shareholders' agreement. Cross-border deals typically adopt the lead investor's home style with local-law adaptations — a UK lead investing in a US Delaware C-corp will use NVCA structure; a US lead investing in a UK Ltd will use BVCA structure (or restructure the company to a Delaware C-corp before investing). The template provides both styles as alternative drafting modes.
What founders and venture investors say
Feedback from founders, in-house finance counsel and lead investors who have used the term sheet template on real fundraising rounds.
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Used this for our first priced round. The pre-money / post-money clarity and the option pool top-up clause meant we went into investor negotiations knowing exactly what each line item would cost us. Saved us a meaningful amount of equity by spotting the option pool shuffle early.
Used the SAFE term sheet variant for our pre-seed. The valuation cap, discount and qualified financing trigger clauses dropped in cleanly — we adapted the YC standard SAFE language with UK-specific governing-law tweaks and got it signed in a week.
Used it for our Series A. The broad-based weighted-average anti-dilution language is exactly what we needed — the lead investor came in with full ratchet on their first draft and we pushed back from this template's wording. Wish there was a bridge / extension round variant, but for first priced rounds this is solid.
Used this template on the lead investor side for a Series Seed. The protective provisions and board composition clauses are properly drafted and gave us an opening position that stood up to founder counter-proposals without needing major redrafting.
As an in-house finance counsel, the most useful thing about this template is the binding vs non-binding section. Many founders sign term sheets without realising exclusivity is binding from day one — this template flags it explicitly and saved us a tricky conversation with our founders before signing.
Solid foundational template. We used the convertible note variant for our seed round and then converted to the priced equity version of the same template at Series A — the consistency across both meant we did not need to learn two different drafting conventions.
Investment Term Sheet — Frequently Asked Questions
An investment term sheet is a short document — typically 4-10 pages — that outlines the principal terms on which an investor proposes to invest in a company. It covers the deal economics (amount, valuation, security type), the investor's rights (information, pre-emption, board seats, protective provisions), governance (board composition, voting), founder and key-person commitments (vesting, lock-in, non-compete), and the conditions and process to closing (exclusivity, due diligence, definitive documents). Most clauses are non-binding and express intent only — the binding clauses (typically exclusivity, confidentiality, expenses, governing law) take effect immediately on signing. The term sheet becomes the playbook for the definitive documents (subscription agreement, shareholders' agreement, articles) that lawyers draft over the following 4-8 weeks.
Most of a term sheet is non-binding — it expresses intent and provides the framework for definitive documents but does not create legal obligations to invest or accept investment. However, certain clauses are typically binding from the moment of signing: exclusivity (the company cannot solicit other investors during the diligence window), confidentiality (the parties cannot publicise the terms or the discussions), expenses (who pays legal costs and how those costs are shared), and the governing law and jurisdiction clauses. The binding nature of these clauses is usually called out explicitly in the term sheet itself — often in a final "Binding and Non-Binding Provisions" section. Treat the term sheet as morally binding even where it is not legally binding: walking away from agreed terms damages reputation in a small ecosystem.
Pre-money valuation is the agreed value of the company before the new investment goes in. Post-money valuation is the value after the investment: pre-money plus the amount raised. For example, a GBP 5 million investment at a GBP 20 million pre-money valuation results in a GBP 25 million post-money valuation, with the new investor owning 20 percent (5 / 25) of the company. The distinction matters most when option pool top-ups are involved: if the option pool is created or expanded inside the pre-money figure, existing shareholders bear the dilution alone; if it is created post-money, dilution is shared with the new investor. Investors typically push for the option pool to be in the pre-money; founders should negotiate the size carefully because every percentage point inside the pre-money is direct founder dilution.
All three are ways to take in investment, but they treat valuation and timing differently. A SAFE (Simple Agreement for Future Equity, originated by Y Combinator) is the simplest: the investor gives money now and receives equity at the next priced round, usually with a valuation cap and/or discount. SAFEs are not debt, accrue no interest, and have no maturity date. A convertible note is similar but is technically debt — it accrues interest and has a maturity date by which it must convert or be repaid. A priced equity round (Series Seed or Series A) sets a valuation now, issues actual shares (typically preferred), and brings full rights and protective provisions. SAFEs and convertible notes are faster and cheaper for early rounds (pre-seed, seed); priced equity is required for institutional rounds and larger amounts because investors need the rights and protections that only a priced round provides.
Liquidation preference is the right to be paid out before ordinary shareholders on a sale, liquidation or winding-up of the company. The market standard is a 1x non-participating preference: the investor gets their money back first (1x of the amount invested), then ordinary shareholders share the rest. Participating preferred is more aggressive — the investor takes their 1x preference AND then participates pro rata with the ordinary shareholders in the remainder, sometimes called "double dip". Capped participating sits in between — the investor participates up to a cap (commonly 2x or 3x the original investment), then takes the larger of the cap or pro rata participation. Most institutional rounds settle on 1x non-participating preferred; participating preferred is usually treated as investor-friendly and pushed back on. Multiple preferences (2x, 3x liquidation preference) are uncommon in healthy markets but appear in distressed or down-round situations.
NVCA refers to the model documents published by the US National Venture Capital Association — the de facto standard for US venture deals from Series A onwards. BVCA refers to the British Private Equity and Venture Capital Association, the equivalent UK industry body whose model documents are widely used for UK venture deals. The substantive economics (valuation, liquidation preference, anti-dilution, board) are similar across both, but the legal structure differs because they reflect different company law: NVCA is built around Delaware C-corp preferred stock with a charter and stockholders' agreement; BVCA is built around English Ltd ordinary and preferred shares with articles and a shareholders' agreement. UK deals also commonly use SEIS / EIS-compatible structures (which require ordinary shares and prohibit certain investor protections), and that drives further structural differences. Lead investor jurisdiction usually drives the style: a UK lead will use BVCA, a US lead will use NVCA.
Anti-dilution protection adjusts the conversion price of preferred shares if the company later issues new shares at a lower price (a "down round"). Without it, the investor's percentage ownership shrinks and the value of their preferred shares is impaired. Full ratchet is the most aggressive form: the investor's conversion price is reset to the new lower price, regardless of how many new shares were issued — so even a small down round can result in significant dilution being shifted from the investor to the founders and other shareholders. Broad-based weighted average is the market standard: the conversion price is reduced, but only by a weighted average that takes account of the size of the down round relative to the total share base. Narrow-based weighted average sits between the two. Always negotiate for broad-based weighted average; full ratchet is rare in healthy markets and should be a red flag.
Yes, even though the term sheet is mostly non-binding. The term sheet sets the negotiating baseline for the definitive documents, and any concession made at term sheet stage is very hard to claw back later in the legal drafting. Have an experienced VC lawyer review the term sheet before signing — the cost (typically GBP 1,000-3,000 in the UK, USD 2,500-5,000 in the US) is minor compared to the impact of accepting an aggressive liquidation preference, broad protective provisions, or a poorly negotiated option pool. For first-time founders especially, a lawyer review surfaces market-vs-non-market terms that founders without VC deal experience would not spot. Lead investor counsel will not represent the company's interests; the company needs its own counsel.
Download the Investment Term Sheet Template
This investment term sheet template handles every standard fundraising scenario: SAFE term sheets for pre-seed, convertible note term sheets for bridge rounds, Series Seed term sheets for first priced rounds, and full Series A term sheets in both NVCA (US Delaware C-corp) and BVCA (UK Ltd) styles. Includes pre-money / post-money valuation language, 1x non-participating liquidation preference, broad-based weighted-average anti-dilution, board composition variants, founder vesting clauses, drag-along and tag-along, and a clearly flagged binding-vs-non-binding provisions section. Suitable for any UK or US fundraising round from first SAFE to institutional Series A.
What's Included in Your Template
- Complete investment term sheet template in Word, PDF and Google Docs formats
- NVCA (US) and BVCA (UK) drafting variants in a single document
- SAFE term sheet variant with valuation cap, discount and qualified financing trigger
- Convertible note term sheet variant with interest rate and maturity
- Pre-money and post-money valuation calculation worksheet
- 1x non-participating and participating preferred liquidation preference clauses
- Broad-based weighted-average anti-dilution drafting
- Board composition variants (3, 5 and 7-seat configurations)
- Founder vesting clauses (4 years, 1-year cliff, retroactive credit)
- Binding-vs-non-binding flag section with all standard binding clauses
- Exclusivity and expenses clauses with capped reimbursement
- Schedule: post-investment cap-table waterfall annex
Why Founders Choose This Template
- Hand-drafted: Written by founders for founders, with input from venture counsel in both jurisdictions
- Dual jurisdiction: Works for UK BVCA and US NVCA rounds without maintaining two separate templates
- 2026 current: Reflects current NVCA and BVCA model documents, YC post-money SAFE, and UK ASA practice
- Plain English: Drafted to be readable by founders without legal training; binding vs non-binding flagged explicitly
- Diligence-ready: Cap-table waterfall annex aligns with Carta, Capdesk, Pulley grant entry
- Founder-friendly pricing: One small fee for unlimited use, not per-round or per-investor
- Editable everything: Word, PDF and Google Docs — edit in whatever tool you use
This template is provided as a starting point and is not legal or financial advice. Term sheet terms vary by deal stage, lead investor preference and jurisdiction. For Series A and beyond, cross-border rounds, complex cap-table situations, or any first-time founder negotiating with institutional investors, have venture counsel review before signing. The terms set at term sheet stage propagate through the definitive documents — concessions made here are very hard to claw back later.