A startup seed term sheet is a statement that sets out the proposed terms and conditions for a proposed investment in a startup company. This document is generally between one and five pages long and is created either by the startup or an investor. Most of the conditions in it are non-binding aside from any confidentiality provisions that apply.
A seed term sheet is often similar to a venture capital investment term sheet in terms of defining investment structures and founder covenants but angel investors tend to be less constrained by standard institutional financial practices. This means that founder and angel investors are free to reach more ‘flexible’ arrangements that suit their specific circumstances and are often easier to understand. Some angel groups have sought to standardize these sheets to streamline decision-making processes and define corporate governance issues that are often an issue.