Series A Term Sheet

This unexpected success shows one thing: the Tech ecosystem strongly needs reference documents to support entrepreneurs, especially at the key stage of the shareholders’ agreement.

This is why The Galion Project is pleased to offer the new, updated and illustrated edition of the Galion Term Sheet: a template letter of intent that precedes the shareholders’ agreement, with notes and comments. It aims to guide founders as they draft the document framing their first funding round with professional venture capital investors (Series A).

Like every tool published by The Galion Project, the new edition of the Galion Term Sheet draws on the experience of Galion entrepreneurs and is available free of charge, in open source. This collective work was led by Jean-Baptiste Rudelle and Frédéric Mazzella, with the valuable help of Renaud Bonnet and Pierre Karpik of the law firms Jones Day and Gide Loyrette Nouel.

Please remember that this letter of intent is a basis for discussion with investment funds: each of its terms can be negotiated. We are counting on your feedback to keep improving it!

What does the Galion Term Sheet cover?

The document goes through a Series A term sheet clause by clause, written in English as funds usually present it. Each clause is followed by a commentary in French explaining what is at stake, the position recommended by Galion entrepreneurs and the room for negotiation: liquidation preference, share conversion, ratchet, voting rights, pre-emption, tag-along and drag-along, liquidity, board composition, leaver clause, stock option plan, representations and warranties, exclusivity and expenses. Charts and drawings by Chomb illustrate the most complex mechanisms, using the worked example of a start-up raising €3M. The guide was designed to respect the interests of founders and investors alike: the success of a venture depends on the balance between the two.

Frequently asked questions about Series A term sheets

Is a term sheet legally binding?

No. The letter of intent does not oblige the investor to complete the deal. In practice, a reputable fund only signs one when it is convinced it will invest, and withdrawals before closing are rare. The most binding clause is exclusivity, set here at 4 weeks: before signing, make sure this is the investor you want to close with. The guide also recommends capping the investor’s expenses, here at €30,000 excluding VAT, payable only if the deal goes through.

What does a “fully diluted” valuation mean?

It includes every share that could result from stock options, BSPCE and warrants already planned. An investor who mentions a valuation almost always means fully diluted: a founder who does not have this in mind ends up accepting a lower real valuation than they think. It happened to many Galion entrepreneurs in their first round.

Should you accept participating or non-participating preferred shares?

With participating shares, the investor first gets their money back, then also takes their share of what remains, like the other shareholders. With non-participating shares, the investor gets their money back first but does not share in the rest: they choose between being repaid or converting their shares to take their share of the price, whichever pays more. The guide recommends non-participating shares, now the standard in Series A. Before any repayment, a carve-out of 10 to 15% of the sale price goes to all shareholders, so that founders keep an incentive to see the sale through. If the negotiation is about participating shares, this carve-out should rise to 20%.

How does the leaver clause work for founders?

100% of the founders’ shares vest quarterly over 4 years. If a founder leaves before the fifth year, unvested shares can be bought back at nominal value, half by the remaining co-founders and half by the company, which can grant them to a replacement. Vested shares can be bought back at market value. Only gross misconduct allows all shares to be bought back at nominal value: the guide drops the good / bad leaver distinction, a source of needless tension. To prevent these situations, see our guide to co-founder relationships.

Should you accept a ratchet clause?

Several leading funds have given it up in Series A. If it is kept, the guide sets three safeguards: it only applies if the investor takes up its pro rata share of the next round (“pay to play”), it is limited in time (2 to 4 years), and it uses the “broad-based weighted average” formula, the least dilutive one. A full ratchet, very punitive for founders, should be avoided.

How much equity should be set aside for stock options and BSPCE?

At least 10% of the fully diluted capital after the round, to attract talent without renegotiating too soon, with vesting of 25% after one year and then quarterly over three years. For the practical side, see our BSPCE Kit.

The term sheet is only one step: its terms are then carried into the shareholders’ agreement, for which our annotated template was updated in 2026, and the governance it sets continues in our Board guide.

The Galion Term Sheet New Edition is backed by several major investment funds: Accel Partners, Alven, Blackfin, BPI France, Breega, Cap Horn, Daphni, Elaia Partners, Idinvest, Iris Capital, Isai, Kima Ventures, Partech Ventures, Serena Capital, Xange