A term sheet is a summary document of key terms in contemplation of a financing (also referred to as an offering). It is usually a short document – it’s about one to two pages in length. It outlines the financial and capital structure of the company that is contemplating the financing at the time of the financing. It gives potential investors a quick, nutshell guide as to the company that they’re considering investing in, and the general terms of investment that they’re being offered. Some common sections of a term sheet include a brief summary about the company conducting the offering; a section setting forth the capitalization of the company; and the terms and conditions of the proposed capital raise, including terms such as conversion, proposed capitalization, financing sought, closing date, option pool information (if any), liquidation preference terms, voting rights, protective provisions, rights of first refusal, and information rights. It is very important for someone considering to invest in a privately held company to obtain information about these types of terms from a company. Otherwise the investor will have little, if any, concrete evidence as to the type of investment that the investor is being offered. If the term sheet is satisfactory to the investor, then the parties move forward and begin drafting up the actual investment documents.