Decoding the Term Sheet: What Every Founder and CEO Needs to Know Before Signing
After a while I thought about writing something to my former blog as well so here is the outcome: a practical guide to venture capital investment terms - from liquidation preferences to anti-dilution, with real-world calculations and balanced alternatives The Scene Picture this. You have spent three years building a fintech company. The product works, a couple of pilot customers are onboard, and now a venture capital fund wants to invest EUR 300,000 at a EUR 5 million pre-money valuation. The term sheet arrives - eight pages of dense provisions, redline comments flying back and forth. Your lawyer flags issues. The VC’s lawyer explains their rationale. Somewhere in the middle lies a deal that works for both sides. This is the reality of an early-stage preferred share financing: the term sheet summarises the principal terms and remains subject to confirmation of the parties. It is not binding - except possibly for exclusivity, but the positions staked out here will de...
