Binding term sheet terms

Most of a VC term sheet is an agreement to agree. Valuation, prefs, board — morally serious, legally usually non-binding until definitive docs are signed. The pieces that typically bind are confidentiality, a no-shop / exclusivity period, and sometimes expense reimbursement if you walk after locking them up.

The big idea

A handshake with a padlock on the door for 45 days is the picture. You are not yet sold, but you promised not to entertain other buyers. The analogy breaks because breaking a no-shop burns trust and can trigger fee-shifting language — it is not a free option to keep shopping quietly.

Typically binding pieces:

• Confidentiality — don't shop the sheet's details carelessly.
• No-shop / exclusivity — for a defined period (often 30–60 days) you will not solicit or accept other financing offers.
• Sometimes expense reimbursement if you walk after locking them up.

Expiration dates matter. A sheet that expires in 14 days forces pace; one that sits open forever invites renegotiation when markets move.

Signing the first sheet to "create momentum" without a second conversation in flight is how exclusivity freezes price discovery. Treat exclusivity as costly. See running a fundraise.

Common mistakes

• A 90-day no-shop with an unproven lead. You cannot run a process if you just paused it.
• Assuming price is legally locked. It is morally serious and still usually non-binding.
• Shopping the sheet's details in violation of confidentiality.

Check yourself

You signed a term sheet. Can the investor walk on valuation before definitive docs?

Usually yes, legally. The no-shop still likely binds you. That asymmetry is why lead quality and exclusivity length matter.

What period is a common no-shop length?

Often 30–60 days. Shorter is better until the lead is real.

Key takeaways

• Price and prefs are usually non-binding until close; no-shop and confidentiality usually bind.
• Keep exclusivity short and the lead real.
• Expiration dates force pace; open-ended sheets invite renegotiation.

Further learning

Next, market terms for a clean early-stage baseline.