How can you balance funding and control during term sheet negotiations?
Term sheet negotiations are a crucial stage of fundraising for startups, as they determine not only how much money you get, but also how much control you retain over your business. However, finding the right balance between funding and control can be challenging, as investors often have different interests and expectations than founders. In this article, we will explore some of the key terms and concepts that affect the balance of power in term sheet negotiations, and offer some tips on how to negotiate effectively and fairly.
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Strategically allocate board seats:Be cautious when giving investors board seats, especially early on. Instead, use other forms of contractual control to meet their needs without compromising your operational authority.### *Fair valuation negotiations:Understand your startup's worth and negotiate a fair valuation to minimize dilution. This approach ensures you retain significant ownership while securing the needed funding.