Term Sheets
A term sheet is not just a valuation. It is the legal architecture of economic priority and operational control.
The Two Prongs: Economics and Control
Every clause in a term sheet falls into one of two buckets: how the money is split in an exit (Economics), and who gets to make decisions until that exit (Control).
Economic Clauses
- Price / Valuation: The pre-money vs post-money distinction.
- Liquidation Preference: Who gets paid first, and do they double-dip? (Read more)
- Anti-Dilution: Protection against down rounds. (Read more)
- Option Pool: Expanded pre-money to push dilution to the founders.
Control Clauses
- Board of Directors: Usually the lead investor takes a seat.
- Protective Provisions: Veto rights on selling the company, changing the board size, or taking on debt.
- Drag-Along Rights: The ability to force minority shareholders to sell if the majority agrees.
The Standard Series A
Instrument
Preferred Stock
Liquidation Pref
1x Non-Participating
Anti-Dilution
Broad-based Weighted Avg
Option Pool
10-15% Post-Money Target