TL;DR - advice on which term sheet clauses founders should look out for and/or definitely negotiate with investors
Helpfulness - 4
Tags - term sheet, term sheet negotiation, venture capital, term sheet advice, initial capital, financing, VC
- What are some term sheet clauses that founders should look out for and/or definitely negotiate with investors?
- Equity/valuation: more than 30% dilution is not advisable in any funding round.
- Board sets: offer a maximum of one seat per round.
- Hiring: be wary of clauses restricting founders from hiring staff without investor approval.
- Expenses: negotiate hard on clauses requiring founders to get investor approval on any major expense.
- Liquidation: remove or immediately negotiate if investors want a clause requiring founders to give them 1-1.5 times returns even if the company goes into liquidation.
- Founder vesting: negotiate hard on clauses barring founders from leaving their companies under any circumstances for at least 5 years.
- Discounting: negotiate any clauses calling for a discount in future funding rounds on valuation.
Follow up links:
- Term sheet guide, https://blog.salesflare.com/term-sheet-guide