Can I Negotiate my VC Term Sheet?

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How to Raise a Series A

How To: Negotiate a Term Sheet

Just got a term sheet from a VC firm? Congratulations — that’s no small feat. Now we’ll help you navigate how to negotiate your term sheet.

Read How To: Negotiate a Term Sheet
How to Raise a Series A

Part 1: Increase to Option Pool

In a typical term sheet, the investor will specify an option pool — a bucket of stock options for future employees. Having an agreed on pool makes life easier for everyone — you don’t have to get shareholder consent every time you want to make a new hire and the VC doesn’t see their ownership get diluted by every hire either.

Read Part 1: Increase to Option Pool
How to Raise a Series A

Part 2: Preference / Preferred Stock

A Preference or Preferred Stock is where an investor buys a security that gives them the right to choose whether to get their money back or convert into common stock.

Read Part 2: Preference / Preferred Stock
How to Raise a Series A

Part 3: Anti-Dilution

The standard VC term sheet has the concept of anti-dilution, meaning if the next round is priced lower than the previous round, the VC will  be entitled to more shares (retroactively) to make up for this unfortunate circumstance. We don’t like the sound of that at all.

Read Part 3: Anti-Dilution
How to Raise a Series A

Part 4: Board of Directors

There are many venture backed startups that have a VC representative from every round — seed, A, B, C, D, etc. It is often said that the performance of a company is inversely proportional to the number of VCs on the Board. A better Board would be one that has a mix of VC representatives and industry experts. But how to get there?

Read Part 4: Board of Directors
How to Raise a Series A

Part 5: The Final Pieces

In this final part, we close out the remaining terms you are likely to see -Voting Controls, Mandatory conversions, and dividends.

Read Part 5: The Final Pieces
How to Raise a Series A

Term Sheet Grader

We developed the term-sheet grader, a simple way to compare different term sheets or help characterize whether a term sheet is good or evil.

Read Term Sheet Grader