---
title: "What Is Letter of Intent?"
term: "Letter of Intent"
description: "A letter of intent (LOI) is a non-binding or partially binding document that outlines the key terms of a proposed deal — acquisition, partnership, or major contract — before full definitive agreements are drafted."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/letter-of-intent
---

# What Is Letter of Intent?

> A letter of intent (LOI) is a non-binding or partially binding document that outlines the key terms of a proposed deal — acquisition, partnership, or major contract — before full definitive agreements are drafted.

**Letter of intent** is the outline deal memo parties sign before lawyers draft the full purchase agreement or master contract.

## How it works

In M&A, an LOI might state purchase price, cash vs stock mix, key employee retention, exclusivity for 30 to 60 days, and conditions to close. Most LOIs say economic terms are non-binding except for confidentiality, exclusivity, and sometimes break fees. Definitive agreements replace the LOI at signing.

In enterprise sales, an LOI can signal procurement intent before a full MSA — less common in early startup sales but appears in strategic partnerships.

## Why it matters

- **Founders:** During acquisition talks, the LOI sets valuation range and structure. Negotiate exclusivity length and what diligence can re-trade price before you go off-market.
- **Investors:** Board approval often required once an LOI is signed. Preferred shareholders may have consent rights on sale processes.

Break-up fees and expense reimbursement if a deal fails are sometimes binding — negotiate caps. Employee communication plans should wait until definitive agreement signing unless leak risk forces earlier disclosure.

Strategic buyers may use LOI exclusivity to slow competing bids while they allocate internal resources — founders should set calendar milestones for diligence progress.

## Common mistake

Assuming "non-binding" means you can walk away freely. Exclusivity and leaked process damage can still hurt if you bail without cause.

## Practical takeaway

Treat exclusivity as valuable company currency — grant it for defined periods with milestones, not open-ended pauses. Founders should keep a parallel view of runway in case the LOI does not convert to definitive agreement.

## Related ideas

- [Letter of Intent (LOI)](/glossary/letter-of-intent-loi) — abbreviated form
- Definitive agreement and closing conditions
- Exclusivity and no-shop provisions

## FAQ

### What is Letter of Intent in simple terms?

An LOI summarizes the main economic and structural terms both sides intend to negotiate into final contracts — price, structure, timing, and sometimes exclusivity — without replacing the full purchase agreement.

### Why does Letter of Intent matter?

LOIs set expectations and often trigger exclusivity periods. Founders should treat exclusivity and confidentiality sections as binding even when "non-binding" appears in the header.


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Source: https://venturecapitaltracker.com/glossary/letter-of-intent