Founders treat a term sheet as a handshake and investors treat it as a contract. Both are half right. Most of it is a statement of intent, but three clauses bind you the moment you sign, and a fourth shapes every round after this one.
Exclusivity binds you now
The no-shop clause is binding from signature. For sixty or ninety days you cannot talk to another investor, whatever happens to this one. Keep the period short and tie it to a closing date.
Costs bind you now
Most term sheets make the company pay the investor's legal fees whether or not the round closes. Cap the number in the term sheet, not the long-form documents, because by then it is agreed.
The liquidation preference shapes the next round
A 1x non-participating preference is the market. Anything above it, or any participation, is a number the next investor will read first and price against you.
