Let’s be honest—when founders dream of raising capital, they rarely imagine sitting across from an investor parsing through a dense legal document filled with terms like liquidation preference, anti-dilution, and reverse vesting. The real fantasy usually involves a handshake, a nod of approval, and a number with six zeroes landing in the bank.
But in the real world, the handshake comes wrapped in legal paper—and that paper is the Term Sheet.
For founders in the Nordics and Baltics—regions where global ambition meets Scandinavian minimalism—the Term Sheet is often the first real taste of venture capital formality. It’s the document that says, “We believe in you—but here’s how this will work.”
So, What Exactly Is a Term Sheet?
A Term Sheet is a non-binding agreement that lays out the terms and conditions of an investment before the lawyers start billing by the hour. It’s not the marriage contract—it’s the engagement ring. Symbolic, promising, and not to be taken lightly.
It outlines the major terms of the deal: how much the investor is putting in, what they’re getting in return, how decisions will be made, and what happens if things go spectacularly well—or painfully wrong.
Why It Matters (More Than You Think)
Most founders get excited about the valuation listed on the term sheet. And fair enough—it’s the headline number that validates your months (or years) of hustle. But seasoned founders know the devil doesn’t just live in the valuation; he’s all over the document.
This is where your future control of the company is negotiated. This is where your exit—yes, that dream acquisition or IPO—is quietly prewritten. And this is where you agree, knowingly or not, to either protect or jeopardize your long-term vision.
Anatomy of a Term Sheet: What You’ll Actually See
Let’s break down the usual suspects in a VC term sheet:
1. Valuation & Investment Amount
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Pre-Money Valuation: Your company’s value before the investment.
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Post-Money Valuation: The value after the cash lands.
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This determines how much of the company the investor gets. Remember: high valuation isn’t always better if it brings unfavorable terms elsewhere.
2. Equity Class & Preferences
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Typically, investors get Preferred Shares—and they do come with privileges.
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Includes liquidation preference (e.g. 1x non-participating), meaning they get their money back first in a sale before founders and employees see a cent.
3. Board & Control Rights
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Investors often want a board seat—or at least an observer role.
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Watch for veto rights on future fundraising, executive hires, budgets, or exits.
4. Anti-Dilution Protection
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If you raise in a down round later, this clause helps investors maintain value.
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Two common flavors: Weighted-Average (founder-friendly) or Full Ratchet (not so much).
5. Vesting & Founder Commitment
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Investors want to make sure founders don’t take the money and disappear to Mallorca.
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Standard is 4-year vesting with a 1-year cliff—applied even if your shares are already issued.
6. Exit Clauses: Tag-Along & Drag-Along
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Tag-along protects minority shareholders in a sale.
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Drag-along lets majority shareholders force others to sell—used to streamline exits.
7. Information & Inspection Rights
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Investors typically want quarterly updates, financial statements, and access to the cap table.
The Psychology of the Term Sheet
Here’s the thing: a Term Sheet isn’t just a financial or legal document—it’s a cultural handshake. It’s where investor expectations meet founder identity. Are you ready to give up some control in exchange for capital? Can you work with this investor for the next 5–10 years, through pivots, crises, and scaling pains?
Too many founders see a term sheet and think: We’ve made it. The truth is, it’s not the finish line—it’s the beginning of a more serious race, now with someone else watching the clock.
Practical Advice: How to Navigate It
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Don’t go solo. Always work with a startup-savvy lawyer. This isn’t the time to Google terms or rely on ChatGPT alone (even though those AI friends are really trying!).
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Negotiate beyond valuation. A friendly cap table, flexible terms, and shared vision matter more long-term than a slightly better valuation.
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Understand control. How much can you decide without your investor? What happens if you disagree?
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Know your non-negotiables. Maybe it’s keeping team culture intact, or retaining hiring autonomy. Make sure the Term Sheet doesn’t undercut that.
Final Thoughts
In the Nordic startup ecosystem—known for its bold ideas and strong values—the Term Sheet is more than legal paperwork. It’s a signal that someone believes in your vision. But belief comes with conditions, and smart founders read those conditions with both head and heart.
If you’re building something world-changing, great. Just make sure the foundation isn’t hiding cracks you agreed to in a rush.
Because while startups are built on vision, they grow—or collapse—on the strength of their agreements.
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