As described in my book The Art of Startup Fundraising, term sheets can be really scary for new start-up founders. More than anything, it’s the fear of the unknown, or of making a mistake that founders may regret later, as the business grows. Term sheets are important, and can be complex, but they don’t necessarily have to be. The key is knowing what to expect, knowing what you want out of a term sheet, knowing what you won’t bend to, and of course having good representation to review all of the fine print.

The term sheet is the document that lays out the terms of the investment and collateral. It details what you as the start-up are giving, and what you are getting in return. Then it lays out the guidelines of how both parties will act to protect the investment.