Happy Halloween. The term sheet. 

Everyone’s excited to sign one; fewer are thrilled years later, when terms linger to haunt the company’s cap table. It’s worth taking the time to unmask the agreement and focus on the key terms that the legalese can obscure.

Focusing on the right topics can save founders and employees from losing money to stacked acquisition preferences (FanDuel, Divvy homes), or losing control of your company (Better Place), or inspiring financial horror movies (Uber, WeWork).

We can’t cover the entire house of mirrors. This article focuses on a typical Series B raise for a tech company (no surprise—that was our most recent raise). We won’t dive into the funhouse of SAFEs, non-standard deal structures, or IPO ratchets. Instead, we’ll focus on what matters most at the A/B stage: valuation, investment amount, secondaries, dilution, board seats, and key rights.

Of course, this isn’t legal advice. Get a lawyer who won’t ghost you, someone who represents you and will walk you through every clause with clarity. I’m also assuming most readers understand basic startup financing terms.

May your covenants be treats, and your cap table remain zombie-free.

Let’s get spooky.

1. The Key Economic Terms to Control

First let’s talk dollars and dilution. These are the points you will be considering once you finally get the term sheets. You don’t want to be fighting for every piece of candy but rather the things that are important to you and the company. You should pick a couple that you *really* care to negotiate about because most should be standard.

• Investment Amount / Dilution. You want at least 24 months of additional  in your downside case (so >30 months). Raising less means you’re likely fundraising again in 12 months.

• Valuation & Option Pool. Push for post-money valuations so any additional option pool is their dilution, not yours. Fight to minimize option pool expansion before the raise. Investors often ask for a pre-money 10-15% refresh, but there is room for pushback. One way is to present a hiring plan that only requires a 6-8% add.

• Dilution Math. Sanitize every term sheet with the same formula: New-investor % = New $ ÷ Post-money. Re-generate the fully-diluted cap table that includes: (i) all SAFEs/convertibles (at cap and discount), (ii) the refreshed ESOP, and (iii) any warrants. Summarise ownership for founders, employees, prior investors, and new investors at close, at a paper-up round, and at exit.

• Anti-Dilution Protections. Most Series B rounds settle on a broad-based weighted average. Still, model out a down round scenario to see the true impact.

• Liquidation Preference. 1x non-participating preferred is standard. Anything outside of this risks a harsh overhang for common stock holders.

• Founder Secondary. Taking 5–10% of the round as secondary is common. This gives founders peace of mind and encourages long-term commitment. $1–2M on a $20M raise is within market norms.

• Investor Control. Make sure you realize the ramifications of selling part of your company are giving up some control. If you have had many other rounds, this could mean giving up founder control. Once more, model the voting and understand what happens if you have a major disagreement over strategic direction.

• Information rights and protective provisions: Quarterly unaudited and annual audited financials are market norm. Limit veto rights to major structural events (e.g., new stock classes, sale, IPO). Push back on anything that slows day-to-day ops.

• ROFR / Pro Rata. Fine for major holders but just make sure angels don’t crowd out the pool.

As a CFO you need to be on top of all of these aspects of the agreement, especially if any non-standard provision sneak in. Of course, your lawyers should be involved but this is your company’s decision at the end of the day.

Tip: Build a clear, simple cap table model that shows what happens in this round and every future round in an up/down/medium scenario so no surprises creep out of the shadows.

2. Build as much leverage as you can

Time is not your friend. If you’re burning cash, the witching-hour is ticking. Your only real leverage at this stage? Multiple funding options. The more credible paths you have, the better your deal. In an ideal world, you want to make sure you have:

• 2–3 term sheets. Ideally from a blue-chip VC, a Tier 2 player, and a strong “wild card.” Prestige carries weight, but smaller firms often give more favorable terms.

• 6–12 months of runway. Start early and hit key milestones before the raise. This gives you breathing room and prevents a rushed deal.

• Backup plans. Have contingencies, whether that is restructuring, bridge notes, or debt options, that buy time if needed.

• An understanding of your value. VCs need to deploy capital and hit returns. You have more leverage than you think, especially if you’re in their strategic sweet spot. Do they need a play in your space? Have they been missing out? That urgency plays in your favor.

Even modest leverage can turn haunts into harvests. Structure the process intentionally to maximize it and make sure the deadlines are moving you towards a solution.

Tip: Run a structured process with shared deadlines and parallel investor conversations to avoid the graveyard of bad terms.

3. Negotiate the terms

Terms aren’t zero-sum. You’re picking a long-term partner, not winning a one-time battle. The tone you set now will shape your boardroom for years.

• Negotiate. Yes, a lot of the terms are pretty standard but you should be able to get slightly better terms on the 2-3 things that you care about. The investor will appreciate that you care, understand, and are fighting for the company.

• Be nice but firm. Investors are future colleagues. Be clear and direct and collaborative.

• Rank your priorities. What matters more, control or valuation? Hands-on support or autonomy? Decide before you negotiate.

• Use expert counsel. Your lawyer should represent you, not your investors or the firm they just closed three other deals with.

• Know when to walk away. Sometimes your best alternative is not taking the money. Know your walk-away line and what it would take to bridge to another raise.

You are going to want to shine a light on the detailed conversations, rather than the CEO, so that she can stay focused on the vision and the promise.

Tip: Your amulet for these negotiations is the words: “This keeps everyone incentivized long-term” 

4. Lining Up the Offers and Making the Decision

Time to choose your partner at the masquerade. Be fast and decisive to drive to a decision:

• Build a comparison grid. Lay out valuation, cheque size, option pool ask, investor % ownership, liquidation pref, board seats, and any secondary.

• Run the numbers. Model out pro-forma dilution and exit scenarios (e.g., 3×, 10× outcomes) for each offer. Know the real economic implications.

• Score the partner. Check references, assess domain fit, and evaluate follow-on strength. Weight “fit” as heavily as economics.

• Set your red lines. Know your non-negotiables and what you can flex on. A slightly lower valuation with the right partner can be worth it.

• Pick fast. Choose within 7–10 days. Notify your lead, sign, and close the loop with others respectfully. Keep momentum on your side.

This is the payoff for months (or years) of work. Make the choice that sets you up to win the next phase. And, make sure you let down the others in a clear way. There is always the possibility you will want to involve them in future rounds.

Tip: Don’t be spellbound by headline valuation. Prioritize alignment, board chemistry, and follow-on support to ward off bad energy.

5. Get the Money and Finalize the Admin

Now that you have the term sheets signed or at least term sheets ready, you want to move fast. Get the documents signed and the money into your account. Key steps:

• Sign docs. Move fast and no slow-roll signing. Momentum matters.

• Send wire details. Confirm wiring instructions and follow up promptly.

• Update the cap table. Lock the new terms into your system, not a spreadsheet.

• Get the 409A. Refresh your 409A to align with new valuation and prep for future hires.

The paperwork may feel tedious, but it’s what officially starts the next chapter.

Tip: Close fast before the clock strikes midnight. You don’t want your deal turning into a pumpkin.

In Conclusion

Some deals give you power; others test your patience. Know your leverage, sweat the essentials, and leave the rest behind. Negotiate the few things that truly count so the cap table stays light and doesn’t turn into a graveyard.