Article · 15 min read

How to Read a Startup Term Sheet Like a Founder

Malpani Ventures Free Intermediate India

This is the term sheet guide written for the Indian cap table, using rupee exits (a ₹40 Cr sale on a ₹100 Cr paper valuation) to show how liquidation preference and ESOP timing quietly move money off your side of the table. It nails the two India-specific traps most founders miss: whether the ESOP pool is carved pre-money or post-money, and full-ratchet versus broad-based weighted-average anti-dilution, then tells you plainly that a startup lawyer who has seen 100 term sheets is worth every rupee and not the place to cut costs.

  • Insist the ESOP pool is created post-completion (post-money) so the dilution sits on the cap table, not on your founder shares
  • Refuse full-ratchet anti-dilution; broad-based weighted average is the Indian market-friendly default to hold to
  • Model the downside exit and lock good-leaver / bad-leaver vesting terms, then pay for an experienced startup lawyer to review before signing
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The question it answers

  1. How do I read a term sheet without a lawyer so I know which clauses to actually fight over?

Read with it

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  2. Scott Kupor, who has run a16z's investing operations and written the book founders quietly read before a raise (Secrets of Sand... a16z Video · 20 min The Economics of Term Sheets Scott Kupor
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