Securing a B2B funding round requires a clear baseline document to align expectations with investors quickly. Get straight to the terms that matter so you can stop negotiating and get back to building.
TL;DR: A solid B2B term sheet outlines the critical financial and control terms of your investment round before you pay lawyers to draft the final binding agreements.
Rule: Keep control clauses simple and standard to close the round faster.
Target: Aim for 15-20% equity dilution for a standard seed round.
Glossary
Pre-money valuation: The agreed value of your company before the new investment capital is added to your bank account.
Liquidation preference: The rule dictating how the payout is divided if the company is sold, ensuring investors get their money back first. Review PitchBook's guide on liquidation preferences to understand how a 1x non-participating preference protects both founders and investors.
Pro rata rights: The right of an investor to participate in future funding rounds to maintain their exact percentage of ownership.
The asset
Copy the asset. Paste the block below into your text editor. Replace the bracketed placeholders with your negotiated terms before sending it to lead investors.
Review examples. Look at successful B2B term sheet examples to understand how other founders structure these clauses. If you are extremely early, consider a seed term sheet template instead.
CONFIDENTIAL TERM SHEET
[Company Name], Inc.
This term sheet summarizes the principal terms of the Series A Preferred Stock financing of [Company Name], Inc. (the "Company"). This term sheet is for discussion purposes only and is not a binding commitment.
1. OFFERING TERMS
Issuer: [Company Name], Inc., a [State of Incorporation] corporation.
Investors: [Lead Investor Name] and other investors approved by the Company.
Amount of Financing: Up to $[Amount], including $[Amount] from the Lead Investor.
Pre-Money Valuation: $[Valuation Amount] fully diluted.
Price Per Share: $[Price] per share (the "Original Issue Price").
1. LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred Stock will be entitled to receive, prior and in preference to any distribution to common stock holders, an amount equal to [1x] the Original Issue Price plus declared but unpaid dividends.
1. VOTING RIGHTS
The Series A Preferred Stock will vote together with the Common Stock on an as-converted basis, and not as a separate class except as required by law.
1. BOARD OF DIRECTORS
The size of the Company's Board of Directors will be set at [Number, e.g., 3] members. The Series A investors will have the right to designate [Number, e.g., 1] director.
1. INFORMATION RIGHTS
The Company will provide standard financial information and inspection rights to investors holding at least [Number] shares of Series A Preferred Stock.
1. EXCLUSIVITY
The Company agrees to work exclusively with the Lead Investor for a period of [30-45] days to finalize the definitive agreements.
Benchmarks
Target 15-20% equity dilution for a standard seed round, aligning with baseline benchmarks from Y Combinator's standard deal data.
Sample math: If you are raising $1,000,000 on a $4,000,000 to $5,000,000 pre-money valuation, it means you are selling roughly 16-20% of the company post-money.
Priced round vs SAFE
Standard Simple Agreements for Future Equity (SAFEs) are much faster and cheaper for your initial funding. You should only use a priced round term sheet when raising larger amounts where investors require a specific valuation and a board seat.
Risks
Do not agree to participating preferred stock unless absolutely necessary to save a failing round. Investopedia's breakdown of preferred stock highlights how participating preferred effectively allows investors to double-dip during an exit. Keep it to 1x non-participating.
Conclusion
Mastering term sheet negotiations is a necessary step, but it is not the whole picture. You can have perfect execution here, but if your other variables like offer strength and market timing are weak, your probability of hitting $10,000 Monthly Recurring Revenue (MRR) remains near 0-5%. Having a clean term sheet template fails to deliver revenue if you are not building a profitable distribution engine to justify the valuation. Investors fund growth metrics, not clean legal paperwork. Stop treating the fundraise as the ultimate goal and focus on getting your product into the hands of paying customers.
FAQ
What is the standard timeline to close after signing this template?
It usually takes 30-45 days to complete due diligence, draft the final legal documents, and receive the wire transfer.
Do I need a lawyer to sign a term sheet?
Yes. While the term sheet itself is generally non-binding, it sets the precedent for the binding legal documents. Always have legal counsel review it before signing.
