Your first term sheet is exciting — and full of terms that can quietly shape your company for years. Understanding the basics before you sign is one of the most valuable things a founder can do.
Valuation and dilution
The valuation determines how much of your company an investor gets for their money. Every round dilutes existing shareholders — so know your pre- and post-money numbers.
Terms that matter beyond price
- Liquidation preference: who gets paid first, and how much, if the company is sold.
- Board seats & control: who makes key decisions.
- Anti-dilution: protection for investors if you raise later at a lower price.
- Vesting: founder shares earning over time.
A founder's rule of thumb
Don't optimise only for the highest valuation — the terms can matter more than the headline number. A slightly lower valuation with clean terms often beats a high one loaded with investor protections.
Read every clause, model the dilution, and get experienced eyes on it before signing. A term sheet is the constitution of your cap table.
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This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.
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