Final answer:
A term sheet is a binding agreement outlining key terms and conditions of an investment, serving as a preliminary agreement. It is not legally binding but sets the foundation for further negotiations.
Step-by-step explanation:
The statement is True. A term sheet is a binding agreement that outlines the key terms and conditions of an investment. It serves as a non-binding document that acts as a preliminary agreement between the investor and the company seeking investment. It provides details such as the investment amount, valuation, rights and obligations of the parties involved, and other important terms.
For example, in venture capital financing, a term sheet is often used to set the foundation for further negotiations and due diligence before finalizing the investment agreement.
It is important to note that a term sheet is not a legally binding contract, but the terms mentioned in the term sheet are typically incorporated into the final binding agreement.