Video · 20 min

The Economics of Term Sheets

Scott Kupor · a16z Free Beginner

Scott Kupor, who has run a16z's investing operations and written the book founders quietly read before a raise (Secrets of Sand Hill Road), walks through the economic clauses one definition at a time: pre-money versus post-money, how the option pool comes out of your side of the cap table, and how liquidation preference and anti-dilution actually pay out in a modest exit. It's the piece that lets you separate the economics terms (money) from the control terms (power) so you know which lever you're pulling when you push back.

• Post-money option pool math dilutes founders, not investors: know whose shares the pool comes from before you agree to its size
• Liquidation preference only shows its teeth in a small or flat exit, run the payout on a modest number, not the dream one
• Learn the definitions cold so the negotiation call is about your three lines, not you decoding jargon in real time