Fundraising & Investors

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

A starting point

Read every term sheet knowing that only a few clauses truly move your outcome: valuation and pool (dilution), liquidation preference (exit payout), board and protective provisions (control), and pro-rata and anti-dilution (future rounds). Skim the boilerplate, spend your energy on those, and always get a startup lawyer to review before signing, because a two-hour review is far cheaper than a bad clause you live with for a decade. The goal isn't to become a lawyer, it's to walk into the call knowing which three lines you'll push back on.

Go deeper

Hand-picked from around the web, each with a note on why it earns your time.

3 resources 3 link-checked Watch Read Use

Watch

▶️ Video
✓ Link checked Free Beginner

Why we picked it 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.

The Economics of Term Sheets

On a16z by Scott Kupor 20 min

  • 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
Open a16z.com →

Read

📄 Article
✓ Link checked India Free Intermediate

Why we picked it 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.

How to Read a Startup Term Sheet Like a Founder

From Malpani Ventures by Malpani Ventures 15 min read

  • 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
Open malpaniventures.com →

Use

📋 Template
✓ Link checked Free Intermediate

Why we picked it This is the one term sheet to benchmark your own against. YC wrote out the fairest single-page term sheet they could from having reviewed hundreds of Series A deals, and every bracketed item is exactly the clause that gets negotiated. It calls out the specific traps by name: participating preferred, cumulative dividends, and a 2-2-1 board versus the founder-friendly 2-1. Download the Word doc, drop your investor's term sheet beside it, and every deviation is a question you now know to ask.

A Standard and Clean Series A Term Sheet (with downloadable template)

From Y Combinator by Jason Kwon and Aaron Harris 20 min read + Word template

  • The bracketed items in the template (beyond company and lead investor names) are precisely the terms that are always or frequently negotiated, so they are your negotiation checklist
  • Board control matters more than valuation: aim for a 2-1 (two common, one investor) structure, not the investor-heavy 2-2-1 that can let a board fire the founders
  • Clean means 1x non-participating liquidation preference, broad-based weighted average anti-dilution, and no cumulative dividends; anything richer for the investor is a flag
Open ycombinator.com →

People also ask

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