Term sheets, explained for angels
A term sheet is a short, non-binding document that sets out the terms of a proposed investment before lawyers draft the full agreements. It is where the real negotiation happens — here is what each section actually means.
The clauses that matter most
Valuation & round size
The pre-money valuation (what the company is worth before your money goes in) plus the amount being raised sets the price per share and how much of the company the new money buys.
Read the deep dive →Liquidation preference
Who gets paid first, and how much, if the company is sold or wound down — before common shareholders (usually the founders) see anything. At seed stage this is typically a simple 1x non-participating preference.
Read the deep dive →Pro-rata rights
The right, not the obligation, to invest more in future rounds to maintain your ownership percentage as the company raises more capital and issues more shares.
Read the deep dive →Other clauses worth reading closely
Board seats & observer rights
At angel check sizes, a board seat is rare; an observer seat (attend meetings, no vote) or simple information rights (regular financial updates) are the realistic ask.
Read the deep dive →Anti-dilution protection
Protects investors if the company later raises at a lower valuation (a "down round") by adjusting their conversion price. Broad-based weighted average is the founder-friendly, and most common, version.
Read the deep dive →Vesting & founder lock-up
Confirms founder shares vest over time (commonly 4 years with a 1-year cliff), so a founder who leaves early does not walk away with all their equity — protecting the company, and by extension your investment.
Read the deep dive →How much of this is actually negotiable
At seed and pre-seed, most angel term sheets in Latin America are built on standardized templates (SAFEs post-money, YC-style documents, or local equivalents) with very few negotiated terms beyond the valuation cap and check size — this is deliberate, to keep legal costs low for both sides.
Once a round moves to a priced equity round with a lead institutional investor, more of the term sheet becomes genuinely negotiable, and angels typically follow the terms the lead has already set rather than negotiating their own.