What a term sheet is, and the clauses founders should watch
Valuation, liquidation preference, anti-dilution and veto rights — the clauses that set a company's course for years.
A term sheet is not a fully binding document, but it sets a frame the final agreement rarely strays far from.
The clauses that matter most
- Pre-money and post-money valuation
- Liquidation preference on a sale or exit
- Anti-dilution, and which formula it uses
- Veto rights over key decisions
- The composition of the board
What is usually underestimated
Board composition. The amount and the percentage are negotiable and change at the next round; the control structure stays for years.
A percentage can be made up at the next round; a veto right cannot.
