Valuation and round size
Pre-money valuation: what your company is worth before investment. Post-money = pre-money + investment. This is the number that determines your dilution. Always clarify whether a stated valuation is pre- or post-money. Round size: the total amount being raised. May be structured as a minimum close (the round can close at a lower amount if needed) and a maximum. Price per share: derived from pre-money valuation ÷ fully diluted shares. This is the price at which new investors buy in.
Liquidation preference
The liquidation preference determines who gets paid first in an exit. 1x non-participating: investors get their money back, then remaining proceeds are distributed pro-rata. Standard and founder-friendly. 1x participating: investors get their money back AND participate in remaining proceeds pro-rata. Significantly reduces founder economics in mid-size exits. 2x or higher: investors get 2x (or more) their investment before anyone else. Red flag — push back hard.
Model your exit at $20M, $50M, $100M, and $200M under each structure before signing. The difference can be millions.
Anti-dilution
Protects investors if you raise a future round at a lower valuation (down round). Broad-based weighted average: adjusts the conversion price based on a weighted average of old and new shares. Standard and founder-friendly. Full ratchet: reprices investor shares to the new lower price entirely. Extremely punitive to founders in a down round. Always push for broad-based weighted average.
Board composition
The board controls the company — including the ability to hire and fire the CEO. Standard Series A board: 2 founders, 1 lead investor, 2 independents. Investor-heavy boards (where investors have a majority) give investors effective control of the company. Fight to maintain founder-friendly board composition through at least Series B. Independent board members should be agreed jointly — not appointed unilaterally by investors.
Pro-rata rights, information rights and other provisions
Pro-rata rights: the right to invest in future rounds to maintain ownership percentage. Standard and reasonable for lead investors. Information rights: the right to receive financial statements (monthly or quarterly) and board materials. Standard for all investors. Drag-along: if a majority of shareholders agree to a sale, all shareholders must sell. Protects investors' ability to exit but limits founder control of exit timing. Ensure the drag-along threshold requires founder approval. No-shop: once you sign a term sheet, you typically agree not to negotiate with other investors for 30–60 days. Sign carefully — if the deal falls apart, you've lost time and momentum.