Considerations For Founders When Negotiating A Term Sheet

A term sheet first summarizes the material terms of a financing transaction. Term sheets are normally not legally binding (with certain exceptions, such as confidentiality and exclusivity) but they are generally thought of as morally binding. It is often difficult for a company to renegotiate something that it agreed to in the term sheet. Therefore, it is important to understand the impact that the terms set forth in the term sheet will have on the company and the founders after the financing, both with respect to economics and operational control. During our QuickLaunch University webinar on term sheet basics and negotiation best practices, we discussed some of the investor protections that founders should understand during the negotiation phase of the process.