Investable Entrepreneur | James Church

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  • What Is a Term Sheet? A Guide for UK Founders

    What Is a Term Sheet? A Guide for UK Founders

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    What Is a Term Sheet? A Guide for UK Founders

    James Church

    WRITTEN BY

    James Church

    Author, Investable Entrepreneur

    James is an award-winning business advisor and best-selling author. His clients have raised over £250m in early-stage funding. 

    You’ve pitched, an investor is interested, and then an email lands with a PDF called ‘Term Sheet’. For many first-time founders, this is the moment fundraising stops being about the story and starts being about the deal. Knowing what you are looking at, and what is worth pushing back on, can save you from terms that follow you into every future round.

    This guide explains what a term sheet is, the key term sheet terms UK founders see at pre-seed and seed, and how to read one before you sign.

    What is a term sheet?

    A term sheet is a short document that sets out the main terms on which an investor proposes to invest in your company. It usually runs to a few pages and covers how much is being invested, at what valuation, and what rights the investor gets in return.

    Think of it as the heads of agreement for your round. Once it is signed, lawyers turn it into the full legal documents, usually a subscription (or investment) agreement and new articles of association.

    In the UK, most term sheets are not legally binding, apart from a few clauses such as confidentiality, exclusivity and sometimes costs. UK Private Capital (formerly the BVCA) makes the same point in its model early-stage documents. Non-binding does not mean unimportant, though. Reopening a point you have already agreed is hard, and investors may read it as a warning sign.

    Why the term sheet matters more than the headline valuation

    Founders often focus on valuation first. That is fair, because it decides how much of the company you give away (our guide on how to value a company covers the basics). But two term sheets with the same valuation can produce very different results for founders. Preferences, control rights and anti-dilution decide who gets paid first and who makes the big decisions.

    Key term sheet terms explained

    Economic terms

    • Investment amount and valuation. A £500,000 investment at a £2 million pre-money valuation gives a £2.5 million post-money valuation, so the investor owns 20%.
    • Option pool. Investors often ask for an employee share option pool to be created before they invest. Because it sits inside the pre-money valuation, it dilutes existing shareholders only, which lowers your effective valuation.
    • Liquidation preference. On a sale or wind-down, investors get their money back before ordinary shareholders. A 1x non-participating preference is common in UK early-stage deals. Be wary of multiples such as 2x, or ‘participating’ preferences, where investors take their money back and then share in what is left.
    • Anti-dilution. This protects investors if a later round is priced lower. Broad-based weighted average is the market norm; full ratchet is aggressive.

    Worked example: how a liquidation preference plays out

    Say an investor puts in £500,000 for 20% of your company, at a £2.5 million post-money valuation, with a 1x non-participating preference.

    • Sale at £2 million. The investor takes their £500,000 back first, because 20% of the sale would only be £400,000. Everyone else shares the remaining £1.5 million.
    • Sale at £10 million. The investor converts and takes 20%, or £2 million. The preference makes no difference.
    • Sale at £2 million with a 2x participating preference. The investor takes £1 million first, then 20% of the remaining £1 million. That is £1.2 million in total, leaving just £800,000 for founders and other shareholders.

    This is why the preference matters as much as the valuation, especially in modest exits.

    A UK-specific warning: if your investors are relying on SEIS or EIS tax relief, their shares cannot carry preferential rights to the company’s assets on a winding up. A standard liquidation preference on those shares can cost them the relief. Read our guide, SEIS Explained: What It Means for Your Startup Raise, before you agree any preference.

    Control terms

    • Board seats. An investor director or board observer.
    • Investor consents. A list of decisions that need investor approval, such as issuing new shares, taking on debt above a set amount or changing the business. Keep this list away from day-to-day operations.
    • Founder vesting and leaver terms. Founders’ shares may vest over three or four years, with ‘good leaver’ and ‘bad leaver’ rules if someone leaves. Our article on sweat equity explains why this matters for founding teams.
    • Pre-emption, drag-along and tag-along. These set who can buy new shares first, and how a sale works when most shareholders agree to it.
    • Information rights and warranties. Regular financial updates for investors, plus statements founders make about the business. Ask for warranty liability to be capped.

    Deal mechanics

    • Exclusivity. Usually 30 to 60 days in which you cannot talk to other investors. This clause is binding.
    • Confidentiality. Also binding.
    • Costs. The company often pays the investor’s legal fees, up to an agreed cap.
    • Conditions. For example, satisfactory due diligence or SEIS advance assurance from HMRC.

    How to read a term sheet before you sign

    1. Model it on your cap table. Check who owns what after this round and after the next one.
    2. Run exit scenarios. Look at a low, middle and high sale price to see how the preference changes founder returns.
    3. Check SEIS and EIS compatibility. If investors need tax relief, the share rights must fit the scheme rules.
    4. Compare with market norms. The UK Private Capital model documents are a useful benchmark.
    5. Get a startup lawyer before you sign. Once you sign, the exclusivity clock starts.

    What is negotiable?

    At pre-seed and seed, the points founders most often move are the option pool size, the list of investor consents, board seats, founder vesting and the cap on legal costs. Pick two or three battles that matter most to you. For any term that looks unusual, ask the investor why they need it. A good investor will explain, and the answer tells you a lot about the relationship ahead.

    Common term sheet mistakes

    • Signing exclusivity with one investor while others are still interested.
    • Agreeing to a large option pool without a hiring plan to justify it.
    • Forgetting that today’s terms set the starting point for your Series A.
    • Negotiating alone, without anyone who has seen many deals.

    Frequently asked questions

    Is a term sheet legally binding in the UK?

    Mostly no. The commercial terms are usually non-binding, but confidentiality, exclusivity and cost clauses typically are.

    How long does it take to go from term sheet to completion?

    Often four to eight weeks, depending on due diligence, the number of investors and how quickly lawyers agree the documents.

    Do I need a lawyer to review a term sheet?

    Yes. A startup lawyer can spot terms that will hurt you in later rounds, and the cost is small next to the value of your equity.

    Final thoughts

    A term sheet is where investor interest becomes a commitment, so it pays to be prepared before one arrives. The strongest negotiating position comes from having more than one interested investor, and that starts with a clear pitch and a focused investor list.

    If you are preparing for a seed round, our seed funding pitch deck services help founders tell a story investors act on. For the step before that, read how to find investors for your startup and check whether your startup is ready to raise investment.

    About the Author

    James Church is an award-winning UK startup advisor, fundraising strategist, and author of Investable Entrepreneur. He has helped founders raise more than £250 million in investment by improving investor readiness, refining fundraising strategies, and developing compelling pitch decks.

    Through Investable Entrepreneur, James works with entrepreneurs to create investor presentations that communicate value clearly, strengthen fundraising confidence, and improve investment outcomes through practical, real-world expertise.

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  • AI-Generated Pitch Decks: What Investors Really Look For

    AI-Generated Pitch Decks: What Investors Really Look For

    Live Workshop: How to make investors love you with James Church. Limited spaces. Click here to register

    Investable Entrepreneur
    Book a call

    AI-Generated Pitch Decks: What Investors Really Look For

    James Church

    WRITTEN BY

    James Church

    Author, Investable Entrepreneur

    James is an award-winning business advisor and best-selling author. His clients have raised over £250m in early-stage funding. 

    AI-Generated Pitch Decks: Why Investors Want More

    I’ll keep saying it until I’m blue in the face: AI is the great leveller. Not because it makes everyone better, but because it pulls everyone towards thAe middle.

    That is a serious problem when it comes to fundraising. Investors do not fund the middle. They look for conviction, clarity, difference and judgement. When every pitch deck starts to look the same, read the same and make the same strategic claims, the founder begins to disappear from the story.

    What Are AI-Generated Pitch Decks?

    AI-generated pitch decks are investor presentations created or heavily assisted by artificial intelligence. AI can help founders structure slides, improve wording, create summaries and organise information.

    The problem starts when AI does more than support the process and begins to replace the founder’s thinking.

    A pitch deck should not simply communicate what a company does. It should show why this founder understands the problem, why the opportunity matters and why they are the right person to build the business.

    That is where generic AI-generated pitch decks can lose their value.

    The Signal Is Disappearing

    A pitch deck was never just a set of slides. It was evidence of how a founder thinks, how clearly they communicate and whether they can persuade customers, employees and investors to believe in something before it is obvious.

    AI has weakened this signal significantly.

    The language is cleaner. The structure is neater. The narrative often feels more professional. But that does not automatically make the pitch more persuasive.

    In many cases, it can do the opposite.

    When hundreds of founders have access to the same AI tools, similar prompts can produce similar language, structures and strategic claims. The result is a growing number of pitch decks that are technically polished but difficult to distinguish.

    Investors Are Already Adapting

    Founders often assume that using AI makes their pitch deck stronger because it sounds more polished. But investors are seeing that same polish everywhere.

    They therefore have to look beyond presentation quality and search for stronger signals.

    Jay Kapoor, General Partner at VSC Ventures, put it well:

    “If you can’t be bothered to differentiate your deck, how can you be trusted to differentiate your company?”

    Simon Blakey, Angel Investor and VC at Playfair, also said:

    “AI-generated decks look remarkably alike… the evidence I used to rely on to decide 1st meeting has stopped carrying any signal.”

    When everyone can produce the same level of acceptable output, acceptable output stops being impressive.

    Investors then have to look harder for what cannot easily be templated:

    • Genuine market insight

    • Founder judgement

    • Customer understanding

    • Original thinking

    • Evidence of traction

    • A clear and defensible point of view

    For more on the factors investors assess in a fundraising presentation, see our guide on what investors look for in a pitch.

    Can AI Create Investor Conviction?

    No. AI can help communicate conviction, but it cannot create genuine founder conviction.

    The biggest mistake founders make is believing that AI can communicate their vision better than they can.

    AI can improve wording, organise ideas, test the logic of an argument and identify gaps. But it cannot replace the experiences and decisions that give a founder’s story meaning.

    Jamal K, Partner at Stellar Ventures, said:

    “You cannot polish [AI] slop into conviction… investors spot the difference in the first three slides.”

    Conviction comes from the decisions you have made.

    It comes from knowing why you chose this problem, why it matters to you, what you have learned from customers and why you are willing to bet your career on solving it.

    AI cannot manufacture those experiences.

    What Should Founders Put in a Pitch Deck?

    Your pitch deck should reveal how you think rather than simply demonstrate how well you can use AI.

    A strong investor presentation should make clear:

    1. What problem are you solving?
      Explain the problem in specific terms and show evidence that it exists.

    2. Why does the problem matter now?
      Give investors a reason to believe the timing creates an opportunity.

    3. Why is your solution different?
      Explain what you do differently rather than relying on generic claims.

    4. What have you learned from customers?
      Real customer evidence is harder to replicate than polished AI language.

    5. Why are you the right founder?
      Your experience, insight and decisions should form part of the investment story.

    6. Why can this become a valuable business?
      Explain the market opportunity, business model and path to growth clearly.

    The more specific these answers are, the harder it becomes for your pitch to sound like everyone else’s.

    Your Job Is Not to Sound Impressive

    Too many founders optimise their pitch deck for professionalism.

    But your job is not simply to sound impressive.

    Your job is to make investors understand why you are the person to build this company.

    That means your deck should reveal how you think. It should contain judgement, trade-offs, evidence and a clear view of the market.

    A rough but specific pitch deck can be more persuasive than a polished but generic one.

    Investors can work with rough edges.

    They cannot work with a founder who has outsourced their point of view.

    If you need professional guidance on developing your presentation, our investor pitch deck consultant service can help founders develop a clearer and more investor-focused pitch.

    How Should Founders Use AI for Pitch Decks?

    The answer is not to stop using AI.

    AI can be extremely useful when it supports the founder rather than replacing them.

    Use AI to:

    • Improve clarity and grammar

    • Challenge your assumptions

    • Identify gaps in your argument

    • Simplify complicated explanations

    • Help structure information

    • Test whether your story is easy to understand

    • Suggest questions an investor might ask

    But keep the important thinking yours.

    Write the core story yourself. Provide the real customer evidence. Make the strategic decisions. Explain the market from your own experience.

    Then use AI as an editor, challenger and thinking tool.

    Use AI, But Do Not Hide Behind It

    I am not arguing against AI.

    Used well, AI can sharpen your thinking, test your logic and help you explain complex ideas more clearly.

    Here is my belief:

    Use AI to support your thinking, not replace it.

    Do not ask it to create its best impression of a passionate founder and then expect investors to feel that passion themselves.

    In a market where everyone has access to similar tools, originality becomes more valuable.

    The founders who stand out will be the ones whose thinking, judgement and passion still come through in the slides.

    Frequently Asked Questions About AI Pitch Decks

    Are AI-generated pitch decks a problem for fundraising?

    Not necessarily. The issue is not using AI itself. The problem is relying on generic AI-generated content that makes the founder’s thinking difficult to distinguish from everyone else’s.

    Should founders use AI to create a pitch deck?

    Founders can use AI to support pitch deck development. It can help with structure, clarity, editing and testing assumptions. However, the core investment story, evidence and strategic judgement should come from the founder.

    Do investors know when a pitch deck is AI-generated?

    Investors may not always know exactly how a deck was created. However, generic language, repetitive structures and unsupported claims can make a presentation less distinctive.

    What makes a pitch deck stand out?

    Specific customer evidence, clear market insight, strong founder judgement, a differentiated business model and a convincing explanation of why the opportunity matters can make a pitch more distinctive.

    Can AI create conviction in a pitch deck?

    AI can help communicate an existing point of view, but genuine conviction comes from the founder’s knowledge, experience, decisions and belief in the opportunity.

    The Founder Still Matters

    If nothing else, remember this:

    Nobody invests in a prompt. They invest in the person behind it.

    AI can make a pitch deck cleaner.

    It can make the writing sharper.

    It can make the structure more logical.

    But it should never make the founder disappear.

    When the technology becomes available to everyone, the advantage shifts back to what cannot be copied so easily: how you think, what you know, what you have learned and what you are prepared to bet on.

    That is what investors need to see.

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  • 3 Critical Fundraising Mistakes Founders Must Avoid in 2026

    3 Critical Fundraising Mistakes Founders Must Avoid in 2026

    Live Workshop: How to make investors love you with James Church. Limited spaces. Click here to register

    Investable Entrepreneur
    Book a call

    3 Critical Fundraising Mistakes Founders Must Avoid in 2026

    James Church

    WRITTEN BY

    James Church

    Author, Investable Entrepreneur

    James is an award-winning business advisor and best-selling author. His clients have raised over £250m in early-stage funding. 

    Yet again this week, another founder with years of commercial experience tells me they’ve been fundraising for months with nothing to show for it. They’ve spent weeks on their business case, they’re on v.12 of their deck, and when they reach out to investors, they get tumble weeds.

    In the same week, a client of mine closed £600k for their pre-seed round. 

    At some point, you need to stop blaming the market for the fact that you’re not raising, and start looking at how you’re approaching the process itself.

    Because most fundraising failures are not caused by bad timing or difficult investors. They’re caused by founders following a playbook that doesn’t work.

    I speak with tens of founders each week, and I see the same pattern again and again. Founders send AI-generated pitch decks that sound interchangeable with every other startup raising capital. They spend weeks refining feature slides while offering very little evidence that anyone genuinely cares about the product. They chase any investor with a cheque rather than identifying investors aligned with the business they are actually building.

    Then, if they do get a meeting, they fill investor conversations with far too much information because they assume detail creates confidence. I see founders walking through endless slides, unpacking every feature, explaining every market angle, and answering questions that nobody has even asked yet. 

    Usually, this behaviour comes from a good place – you care deeply about your business and you want investors to fully understand it. But when you struggle to communicate the core opportunity clearly and directly, investors often see that as uncertainty rather than depth. 

    The long, painful and failed attempts at fundraising are rarely due to a founder having a lack of information. They’re nearly always down to three common mistakes.

    Mistake 1: Most founders are pitching the average

    There’s a dangerous assumption in startup culture that fundraising is mainly about brilliant ideas and the power of persuasion. You’re taught that if you can just improve your pitch enough, investors will eventually say yes.

    But investors are not backing ideas in isolation. They’re assessing risk, judgment, credibility, execution ability, and momentum. They’re trying to determine whether you can build something commercially durable under pressure.

    Investors see hundreds of businesses positioning themselves as category-defining opportunities. And most of those founders sound the same because the AI you’ve used to develop your pitch language is giving every founder a version of the same text:

    “The market is moving, but existing solutions have not kept pace.”

    “Customers are already changing behaviour.”

    “Our moat is not just the technology – it’s the combination of distribution, customer behaviour, and operational integration that compound over time.”

    “This is no longer a future problem – it is an operational problem today.” 

    “The opportunity is not product innovation, but operational transformation.”
     
    “We become more valuable as adoption compounds.”
     
    “The real advantage is not technology alone, but execution speed.”
     
    “We are building for where the market is going, not where it has been.”
     
    “This is a business designed for long-term defensibility.”
     
    “The market does not need another tool. It needs a better operating model.”
     

    This makes you sound like the average. AI is trained on all available data and used by nearly every founder. Therefore, it makes sense that everything it produces brings all founders towards the middle. Founders terrible at pitching get elevated to the median, and those who have great potential get pushed down towards the baseline. 

    Investors have become very good at filtering out this AI-generated noise. What cuts through is communication that inspires, has personality, shows the investors the founders’ priorities, and captures the personality of the individuals behind this brilliant business.

    Mistake 2: Pitching before credibility

    While many founders are obsessing over perfecting the deck and getting AI to write their slides, the smarter approach is to focus on how you express your credibility, insights and authority.

    This can take different forms.

    It might be customer traction, strategic partnerships, a waiting list, revenue consistency, industry recognition, or unusually high engagement from a specific market segment. It can also be your own personal track record

    What matters is that you are demonstrating you have something real, something tangible, something that you’ve built and are able to get others excited by. You want to show instantly how you are driving progress, building momentum and gaining traction.

    Most founders think that investors will understand this progress and traction from the various claims that they would make in their pitch deck, but it’s actually not the case. Investors build confidence in a founder and their ability through observing their behaviour and their progress over time

    I’ve seen founders completely change the outcome of a raise within weeks simply by reframing and expanding on their progress, experience, credibility, and traction. Suddenly, investor conversations become easier because they see a founder who’s capable of delivering a return.

    Mistake 3: Thinking automation makes fundraising easier

    There are two types of founders: those who scrape investor lists, send generic cold emails, attach decks immediately, then wonder why nobody responds.

    Then there are the founders who spend weeks and months developing their business case, their pitch, and their projections, and then get scared to actually put themselves out into the market, probably for fear of rejection. Their safety net is behind their computer screen, and they really just want to keep building in their spare room rather than get their ideas out into the world.

    Neither of these types of founders raise investment. The founders who raise investment are the ones who prioritise human relationships over and above everything else.

    Fundraising remains deeply human despite all the automation surrounding startup ecosystems. Investors still back people they trust. Trust usually develops through stories and human connection – not cut and paste DMs and generic cold emails.

    The founders who perform well during fundraising usually spend far more time building relationships with investors. They engage with thought and personality, and they even publish their insights publicly to demonstrate credibility. They tend to prioritise awareness of themselves before awareness of their ideas.

    I’ve watched founders go from zero investor interest to multiple term sheets in a matter of weeks after changing how they approached their outreach communication. The business didn’t change at all, but the way they showed up personally did.

    Stop following the crowd

    The startup ecosystem has created a strange fundraising culture where you are encouraged to copy what other founders are doing without questioning whether it actually works.

    Everyone uses similar decks with similar language and similar outreach tactics. Then everyone wonders why investor attention is so difficult to secure.

    I’ve spent the last 10 years helping founders stand out, to be seen as different to those around them, to position them in the top 1% of founders successfully raising investment. 

    The one thing that’s taught me is that the founders who successfully raise are usually the ones willing to step outside the typical pattern. The ones who embrace doing things differently from the rest.

    Most importantly, they recognise that investors are not looking for the loudest founder in the room, who thinks they have the best idea. They realise investors are looking for the founder who appears most likely to execute.

    If you’ve been fundraising for months without traction, it’s worth asking whether the issue is really the market – or whether you’re still following a process designed for a different environment. Or falling into the traps that draw you towards the average.

    If you want to do things differently, stand out from your peers and grab an investors attention, check out how I can help you raise investment.  

    What should founders do instead?

    Avoiding these mistakes is only the first step. Founders also need a fundraising process that builds credibility, creates genuine investor interest, and gives investors a reason to continue the conversation.

    Start by making the investment story specific to your business. Instead of relying on generic startup language, explain the problem in your own words and use real customer evidence wherever possible.

    Build credibility before asking for investment. Share progress, customer insights, product development, partnerships, or other meaningful evidence that shows the business is moving forward.

    Finally, treat investor outreach as relationship building rather than a numbers game. Research investors carefully, understand what they typically invest in, and find relevant reasons to start a conversation. A smaller number of thoughtful conversations can be more valuable than hundreds of generic emails.

    The objective is not simply to get more investors to open your deck. It is to become the kind of founder investors want to keep talking to.

    Frequently Asked Questions

    Why are investors not responding to my pitch deck?

    Investors may ignore a pitch deck when the opportunity is unclear, the outreach is too generic, or there is not enough evidence to establish credibility. Improving the deck alone may not solve the problem. Founders should also review their targeting, investor outreach, traction, and overall fundraising strategy.

    Should founders use AI to create their pitch deck?

    AI can be useful for research, structure, editing, and brainstorming, but founders should avoid relying on generic AI-generated messaging. Your pitch deck should reflect your own experience, customer knowledge, business insight, and personality. Investors need to understand what makes your opportunity and your approach different.

    How can a startup build investor credibility before raising funds?

    Founders can build credibility through customer traction, pilot projects, partnerships, revenue, industry expertise, customer research, public content, or a strong personal track record. The most important factor is demonstrating meaningful progress and evidence that supports the investment story.

    Is investor outreach still important when raising in 2026?

    Yes. Technology can make investor research and outreach more efficient, but fundraising remains relationship-driven. Personalised communication, relevant introductions, industry relationships, and consistent engagement can help founders build the trust required for an investment conversation.


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