The term sheet in plain terms: five clauses that decide control.

A term sheet looks innocent — a few pages, lots of abbreviations. But it’s where most of the decisions about who really controls the company after the round are made.

A term sheet isn’t a contract yet, but it sets the frame for all the round documentation. What you agree here will, in 90% of cases, end up in the binding documents. So it’s worth understanding the five clauses that most often decide control.

1. Liquidation preference

Defines who gets how much at exit, before the rest is shared. The multiple and whether the preference is "participating" can completely change what founders are left with in a weaker exit.

2. Anti-dilution

Protects the investor against a drop in value at the next, weaker round. The "full ratchet" version is far more dangerous for a founder than "weighted average".

3. Voting and veto rights

A list of decisions requiring investor consent. The broader it is, the less operational freedom the management board keeps.

A founder should understand every clause they sign. Otherwise the negotiator isn’t the one taking the risk, but the one with more lawyers.

4. Founder vesting

Yes — your own shares are subject to vesting too. The terms and so-called acceleration at exit decide what happens if you leave or the company is sold.

5. Drag-along

Lets the majority force the minority to sell when it wants to exit. The threshold and the protections around drag-along are an often-underrated clause.