📄 Article
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Free
Beginner
Why we picked it
This is the reference point for what a clean deal looks like, written by the people who have watched hundreds of Series A term sheets cross their founders' desks. It names the exact clauses that quietly cost you (liquidation preference above 1x, participating preferred, cumulative dividends that compound the hurdle every year, and board or protective-provision language that hands investors operating vetoes) and teaches you to read the terms an investor insists on as a signal about how they see the risk. It ships with a downloadable clean template you can hold your own term sheet up against.
From
Y Combinator
by Y Combinator
12 min read
- 1x non-participating is the standard; anything richer (participating, multiples, cumulative dividends) is a red flag you negotiate before the price
- Board and protective provisions can hand investors control over budgets, hiring, and pivots even at a founder-friendly valuation, read those clauses as carefully as the economics
- The terms an investor pushes for reveal how risky they think the deal is, so a 'dirty' term sheet is also a signal about the investor
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ycombinator.com →
✍️ Essay
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Free
Intermediate
Why we picked it
Feld (co-author of Venture Deals) does the arithmetic most founders never run: on a $5M investment for 50% and a $20M exit, a plain 1x preferred pays the investor $10M, but participating preferred pays $5M back plus half of the remaining $15M, so $12.5M, and founders drop from $10M to $7.5M on the same headline. He then stacks it across three rounds ($40M in, $200M exit) where participation quietly moves investors from 70% to 76% of the proceeds, and walks through what a participation cap actually does. This is the worked example that makes 'participation stacks against you at exit' concrete.
From
Feld Thoughts
by Brad Feld
10 min read
- Participating preferred lets investors double-dip: money back first, then split the rest as if they held common, which silently shifts millions at exit
- The damage compounds across rounds; every participating round adds another layer that comes out of founder proceeds
- A participation cap softens the hit but creates a 'flat spot' where investor and founder incentives diverge on moderate exits
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feld.com →
📄 Article
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India
Free
Intermediate
Why we picked it
This is the clause-by-clause decoder written for Indian reality, not a US template retrofitted. It runs the founder-payout math on 1x non-participating vs participating vs predatory multiples at a $50M exit and a $15M down exit, contrasts broad-based weighted-average against full-ratchet anti-dilution with the actual conversion-price numbers ($2.40 vs $1.50), and shows the pre-money vs post-money option-pool shuffle diluting only founders. Then it layers on what US guides skip: CCPS and CCD structures, RBI pricing guidelines and the FC-GPR filing deadline, and Press Note 3, so you know which clauses are negotiable and which are regulatory.
From
The Founder's Guide to Startup Funding (Indian Ecosystem)
by Niraj Kumar
35 min read
- An Indian term sheet is a CCPS/CCD instrument under FEMA, so RBI pricing rules and the FC-GPR filing shape terms that never appear in a US template
- Worked payout tables show participating preferred and full-ratchet anti-dilution can wipe out founder proceeds even on a healthy exit
- DPIIT recognition and pool sizing to real 12 to 18 month hiring needs are concrete levers to push back on the pool shuffle
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swimming-with-sharks.pages.dev →