What does a term sheet typically outline?

A term sheet typically outlines the fundamental agreements between parties in a startup investment, particularly focusing on terms related to the investment itself. The reason valuation and board seats are key components is that they establish the financial framework and governance structure for the organization. Valuation determines how much the company is worth, and this affects how much equity is offered to investors in exchange for their investment. Additionally, board seats detail the governance rights of investors, indicating their influence in decision-making processes within the startup.

In contrast, investment risks and rewards, business goals and strategies, and market analysis and projections, while important in the overall context of a business strategy, are not the main focus of a term sheet. Instead, these elements may be discussed in broader business plans or investment pitches but are not typically explicit components detailed within a term sheet.