Five clauses to read twice in a term sheet
Most of a term sheet isn't binding. These five clauses still decide most of what you'll sign later.
A term sheet is short, and it isn't binding on most points. That makes it easy to skim. But almost everything in the final documents is negotiated against it, so the time to push is now.
Liquidation preference
This decides who gets paid first in a sale. A 1x non-participating preference is common at seed and Series A. Anything above 1x, or participation on top, moves money from founders to investors in a modest exit.
Board composition
Count the seats. Who appoints each one, and what happens to the founder seats if a founder leaves? A board you can't control is a company you can't steer.
Pro rata rights
The right to invest in later rounds is usually fine. Watch for super pro rata, which lets one investor take more than their share and can crowd out a new lead.
Protective provisions
The list of things the company can't do without investor approval. Read every item. Some, like changing the charter, are standard; others, like approving the budget, are operating control.
No-shop
A promise not to talk to other investors for a period. Thirty days is common. Longer, without a way out if the deal stalls, leaves you stuck.
This is general information, not legal advice for your round. Every financing is different.