After months of pitching, getting a term sheet feels like relief — finally, someone said yes. That relief is exactly the emotional state in which founders sign terms they'll regret, because the instinct to just be done with fundraising overrides the instinct to actually read what's in front of them.
A bad investor is a ten-year problem, not a one-time decision
You will likely work with this investor, in board meetings, through hard decisions, for the life of the company. A term sheet with slightly better economics from someone who will make your board meetings miserable is very often a worse deal than a slightly smaller check from someone who will actually help. Talk to at least three founders that investor has previously backed — including at least one whose company struggled — before you sign anything.
Watch for control terms disguised as protective terms
Broad veto rights over hiring, spending, or future fundraising can sound like reasonable investor protection in the term sheet, but in practice they can hand an investor effective control over decisions that should be yours. Read every protective provision and ask, specifically, "what does this stop me from doing without asking permission first."
A low valuation isn't always the real problem
Founders fixate on valuation because it's the single easiest number to compare across offers. But liquidation preferences, board composition, and pro rata rights often matter more to your actual outcome than the headline number. A clean term sheet at a lower valuation frequently beats a messy one at a higher number.
It's fine to walk away from your only offer
A bad deal doesn't just cost you now — it can make your company harder to sell, harder to raise again, and harder to run. If a term sheet genuinely doesn't work, no fundraise is often better than a bad one. That's a hard thing to believe in the moment you're most relieved to have an offer at all — it's true anyway.