As I mention in my post, When VCs Issue Term Sheets, there are two points in the investment process at which VCs typically issue term sheets: 1) before due diligence and 2) after the majority of their external due diligence, but before confirmatory due diligence.

Term sheets that are issued earlier in the investment process (before due diligence) typically carry with them less of a commitment from the VC to invest. This shouldn’t be too much of a surprise, since when there is more due diligence left to do that could unveil information that will change a VC’s interest in the company.

In my experience, the best early stage VCs do much of their diligence before issuing a term sheet. At the time when these VCs issue a term sheet they will typically have decided that they like your market, your model, your team and the general prospects of your startup. As a result, for the best early stage funds the issuance of a term sheet is a strong statement of interest, and is nearly a commitment to invest.

In fact, I have heard VCs who issue term sheets later in the process cite statistics about how infrequently they have walked away from an investment after issuing a term sheet (some claim that they have never have), highlighting the level of commitment a term sheet can signify.

However, since investment intentions can vary when a VC issues a term sheet, it’s important to ask the VC what issuing a term sheet means to them.