This is one of those things where people nod along but don’t actually understand the sequence. Here’s a Peanut Project–friendly, plain English, but still deal-accurate.
🥜 Peanut Project Deal Flow Explained
(IOI → LOI → Term Sheet → Definitive Agreements)
Think of this like dating → engagement → marriage in deals.
1️⃣ IOI — Indication of Interest
🧠 What it is:
A light, non-binding signal that someone is interested in doing a deal.
💬 In plain English:
“Hey, this is interesting. If everything checks out, we might want to do something in this range.”
📄 What’s inside:
- Rough valuation range
- General structure (buy, invest, partner, etc.)
- Very high-level terms
⚠️ Important:
- Not binding
- Can change a lot later
- Often used to get access to more info (data room)
🥜 Peanut analogy:
“I like you. Let’s go on a few dates and see.”
2️⃣ LOI — Letter of Intent
🧠 What it is:
A more serious, semi-detailed proposal to do a deal.
💬 In plain English:
“We’re serious. Here’s how we’d likely structure the deal—let’s move forward exclusively and finalize details.”
📄 What’s inside:
- More specific valuation
- Deal structure (cash, stock, earn-out, etc.)
- Timeline
- Exclusivity clause (often)
- Basic legal framework
⚠️ Important:
- Mostly non-binding, BUT:
- Exclusivity = binding
- Confidentiality = binding
🥜 Peanut analogy:
“Let’s stop seeing other people and figure this out together.”
3️⃣ Term Sheet
🧠 What it is:
A structured summary of the key business terms, especially common in fundraising.
💬 In plain English:
“Here are the exact economic and control terms of the deal.”
📄 What’s inside (example for investment):
- Valuation (pre/post money)
- Ownership %
- Board seats
- Investor rights
- Liquidation preferences
- Anti-dilution terms
⚠️ Important:
- Usually non-binding (except some clauses)
- Much more detailed than LOI
- Sets the blueprint for legal docs
🥜 Peanut analogy:
“Let’s agree on how everything works in our life together—money, roles, decision-making.”
4️⃣ Definitive Agreements
🧠 What it is:
The actual legal contracts that finalize the deal.
💬 In plain English:
“This is the real thing. Once signed, it’s official.”
📄 What’s included:
Depends on the deal, but typically:
- Share Purchase Agreement (SPA)
- Shareholders’ Agreement
- Investor Rights Agreement
- Employment agreements (if relevant)
⚠️ Important:
- Fully binding
- Lawyers take over heavily here
- Based on Term Sheet / LOI
🥜 Peanut analogy:
“You’re married. This is the legal contract.”
🔄 HOW IT ALL FITS TOGETHER
Typical Flow:
- IOI → early signal
- LOI → serious intent + exclusivity
- Term Sheet → detailed economics (often overlaps with LOI depending on deal type)
- Definitive Agreements → signed deal
⚡ KEY INSIGHTS (FOR THE COMMUNITY)
1. Not every deal uses all 4
- M&A → IOI → LOI → Definitives
- VC → Term Sheet → Definitives (often no IOI/LOI)
2. “Non-binding” ≠ meaningless
- It sets expectations
- Walking away later has reputational cost
3. The real negotiation happens early
- By the time you reach Definitive Agreements:
👉 90% of business terms are already decided
4. Exclusivity is a big deal
- Once signed:
👉 You can’t shop the deal around
🧭 SIMPLE SUMMARY
| Stage | Meaning | Commitment Level |
|---|---|---|
| IOI | “Interested” | Low |
| LOI | “Let’s do this (probably)” | Medium |
| Term Sheet | “Here are the exact terms” | Medium-High |
| Definitives | “Done deal” | High |
🥜 FINAL TAKE
If you remember one thing:
Deals don’t happen when contracts are signed—
they happen when terms are agreed in principle.
Everything after that is just lawyers making it official.