Startup term sheet checklist for founders in India
Review valuation, investment instrument, dilution, control, liquidation, founder obligations, closing conditions and binding clauses before signing a startup term sheet in India.
In this guide
What is a startup term sheet?
A term sheet summarises proposed investment terms and provides a basis for negotiating definitive documents. Startup India describes it as an early-stage statement of proposed terms; whether a clause binds the parties depends on its wording, surrounding documents and applicable law. Treat every signature, exclusivity promise and confidentiality clause seriously and get independent legal advice before signing.
Confirm the parties, instrument and amount
Check the exact company and investor entities, investment amount, currency, instrument and whether funding is one closing or staged. Identify any conditions, expiry date, tranche milestone or follow-on commitment. Confirm the person signing for the investor has authority and that the proposed instrument is available to your company under its documents and current law.
Understand pre-money, post-money and the fully diluted share count
Ask for the valuation definition, price per share and a cap table showing issued and potential shares before and after closing. Confirm how options, convertibles and any new pool are counted. Compare the resulting ownership and dilution with your own model; two proposals with the same headline valuation may produce different outcomes.
Read the clauses that affect future decisions and exits
Review board composition, reserved matters, information rights, pro-rata participation, transfer restrictions, rights of first refusal, tag or drag provisions and exit language. Ask what each clause permits in a future financing, sale, founder departure or disagreement, and whether the obligation applies to the company, founders or both.
| Clause | What the draft says | Business impact | Question for counsel | Agreed change or status |
|---|---|---|---|---|
| Price and ownership | ||||
| Instrument and closing | ||||
| Governance and consent | ||||
| Founder and employee terms | ||||
| Exclusivity and binding terms |
Which economic terms deserve close review?
Check liquidation preference and participation
Find out how proceeds are distributed if the company is sold, wound up or otherwise exits, and whether the investor first receives a preference, also shares remaining proceeds, or has a multiple. Model a modest, expected and strong exit with counsel so the founders understand the payout waterfall rather than reading only the headline ownership.
Understand anti-dilution and future-round rights
Review how a later issue at a lower price affects conversion or ownership, which price formula applies, and what exceptions are written. Check pro-rata or pre-emptive rights, their deadlines and any minimum participation amount. These terms can affect future fundraising flexibility and the ownership of founders and employees.
Ask how the employee option pool changes the founders' percentage
Confirm the pool size, whether it is created or increased before or after investment, who approves grants and whether unallocated options count in the financing calculation. Model the issue with the actual cap table and convertible instruments before agreeing to a headline percentage.
Which control, founder and closing clauses matter?
Map board, veto and information rights to real operations
List each decision that requires investor consent, including borrowing, budgets, hiring, new securities, sale or related-party transactions. Check thresholds, emergency exceptions, response times and what happens if consent is not given. Review regular reporting and inspection rights against the company's ability to produce reliable information.
Review founder vesting, transfer and departure terms
Read any reverse vesting, lock-in, good-leaver or bad-leaver, non-compete or non-solicit wording with Indian counsel. Check what happens after illness, caregiving, termination without cause, disability, a dispute or a voluntary exit. Confirm the terms do not silently transfer founder shares at a punitive price or conflict with existing agreements.
Separate binding obligations from proposed deal terms
Identify confidentiality, exclusivity or no-shop, costs, governing law, dispute resolution, announcements and expiry provisions. A heading such as 'non-binding' does not necessarily make every paragraph non-binding. Confirm which clauses survive if the investment does not close and how the company can end discussions.
List every closing condition and responsible person
The definitive documents, company approvals, investor checks, regulatory or corporate filings, third-party consents and fund-transfer steps may all matter. Assign an owner and target date for each condition, and confirm no share issue or operational commitment should occur before the required approvals and documents are complete.
Term sheet questions founders ask
Is a term sheet always non-binding?
No. Some proposed commercial terms may be non-binding while confidentiality, exclusivity, expenses or other clauses can be binding if drafted that way. Have counsel review the exact text and surrounding documents before signing.
Can I negotiate an investor's term sheet?
Yes, the parties can discuss terms before definitive documents are prepared. Prioritise the provisions that affect ownership, control, future fundraising and founder obligations, and explain the business reason for each proposed change.
Should a founder use a template from the internet?
A template can help identify topics but cannot determine the right terms for a particular company, instrument, investor or current Indian law. Do not sign a generic form without local legal review.
Who should review a startup term sheet in India?
Use an independent Indian startup or securities lawyer for legal rights and an accountant or finance adviser for valuation, dilution, tax and cash-flow effects. The founder should understand the final terms personally before authorising company approvals.
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Sources and publication record
Draft prepared 26 September 2026; project-team editorial review pending · Sources checked .
- Startup India: legal considerations and startup term sheetsDepartment for Promotion of Industry and Internal Trade, Government of India
- Companies Act, 2013India Code, Ministry of Law and Justice, Government of India
- Ministry of Corporate Affairs: company services and current incorporation portalMinistry of Corporate Affairs, Government of India