How to Negotiate a Term Sheet, Part I

In this two-part series, columnist Tom Taulli defines key terms and sketches out common pitfalls for entrepreneurs negotiating a term sheet with venture capitalists

A term sheet is a document prepared by venture capitalists that sets forth the key terms of a proposed investment. The temptation for the entrepreneur is to focus mostly on the overall valuation of the transaction. But this can be fatal. Keep in mind that a term sheet has a variety of protective clauses for the VC that can significantly reduce the valuation for the entrepreneur. As a result, it's imperative to have an experienced attorney negotiate a term sheet with you.

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