EconomicsVenture term sheet
Full-ratchet anti-dilution
A full ratchet re-prices the entire prior round to the new lower price, so even a small down round can wipe out founder ownership.
- What's normal
- Broad-based weighted-average anti-dilution is the market standard; full ratchet is rare outside distressed rounds.
- Ask for
- Replace with broad-based weighted-average anti-dilution.
EconomicsVenture term sheet
Weighted-average anti-dilution
Weighted-average anti-dilution softens the effect of a down round in proportion to how much stock is issued.
- What's normal
- Broad-based weighted-average is the market standard.
EconomicsVenture term sheet
Option pool
A pre-money pool is carved out of the founders' share before the investment, so it dilutes founders alone; a post-money pool shares the dilution with the new investor.
- What's normal
- Pools are commonly 10–15% of the post-money cap table, sized to a 12–24 month hiring plan; pre-money inflates the effective valuation cut.
- Ask for
- Size the pool to the hiring plan, measure it post-money, or credit the pool against the pre-money valuation.
EconomicsVenture term sheet
Liquidation preference multiple
The multiple is how many times investors are repaid before common holders share in an exit.
- What's normal
- 1x non-participating is the market standard; anything above 1x is off-market outside distressed rounds.
- Ask for
- Reduce to 1x non-participating.
EconomicsVenture term sheet
Participation rights
A participating preferred is paid its preference and then also shares in the remainder — a 'double dip' that shrinks common proceeds.
- What's normal
- Non-participating is the market standard; if participation is conceded it is normally capped at 2–3x total return.
- Ask for
- Make the preferred non-participating, or cap total participation at 2–3x.
ControlVenture term sheet
Founder re-vesting
Re-vesting already-earned founder equity from zero hands the investor leverage over you and undoes the time you've already put in.
- What's normal
- Founders are commonly credited for time served, with 25–50% of unvested shares vesting on a change of control.
- Ask for
- Credit time already served; cliff waived; double-trigger acceleration on a change of control.
ControlVenture term sheetEmployment / compensation offer
Vesting acceleration
Acceleration protects unvested equity if the company is acquired or you're terminated without cause.
- What's normal
- Double-trigger acceleration (change of control + termination) is the common founder ask.
Term & exitVenture term sheet
No-shop / exclusivity
A no-shop bars you from talking to other investors while they diligence — a long one leaves you with no BATNA if terms shift late.
- What's normal
- 30–45 days is typical; beyond 60 days is off-market for a seed/Series A.
- Ask for
- Cut to 30 days, with automatic release if the investor re-trades terms.
ControlVenture term sheet
Investor board control
If investors hold a board majority they can hire and fire management and control sale decisions from day one.
- What's normal
- Early-stage boards are typically balanced (founders / investor / independent) rather than investor-controlled.
- Ask for
- Founder-balanced board with one mutually agreed independent director.
EconomicsVenture term sheet
Redemption rights
Redemption lets investors force the company to buy back their shares on a schedule — a cash call a startup rarely survives.
- What's normal
- Redemption rights are uncommon in venture term sheets.
- Ask for
- Delete the redemption right.
EconomicsVenture term sheet
Cumulative dividends
Cumulative dividends grow the investor's preference every year the company stays private.
- What's normal
- Non-cumulative dividends, payable only if declared, are the standard.
- Ask for
- Make dividends non-cumulative, payable only when declared.
ControlVenture term sheet
Drag-along
A drag-along lets a defined group force all holders to sell — check who controls the trigger.
- What's normal
- Market drag-along needs board + majority of preferred + majority of common.
- Ask for
- Require board, majority-of-common and a minimum price to trigger.
EconomicsVenture term sheet
Pay-to-play
Pay-to-play converts non-participating holders' preferred to common — it can hit early angels.
- What's normal
- Uncommon at seed; more common in down rounds.
- Ask for
- Limit to major investors and exclude founders and angels.
ControlEmployment / compensation offerFreelance / services agreement
Non-compete
A non-compete limits where you can work after the engagement ends — in many jurisdictions it is unenforceable or narrowly enforced, but it still chills your options.
- What's normal
- Six to twelve months, narrowly scoped to direct competitors, is the outer edge of reasonable; several jurisdictions void them entirely.
- Ask for
- Delete it, or narrow to 6 months, direct competitors only, with paid garden leave.
ControlEmployment / compensation offerFreelance / services agreement
Non-solicit
A non-solicit restricts you from hiring or approaching the company's staff or clients.
- What's normal
- 12 months, limited to clients/staff you actually worked with, is standard.
- Ask for
- Limit to 12 months and to clients or colleagues you worked with directly.
IP & ownershipEmployment / compensation offer
Overbroad invention assignment
This assigns even inventions made on your own time and unrelated to the company — including side projects.
- What's normal
- Assignment should be limited to work within the scope of your job or using company resources, with a carve-out for prior and own-time inventions.
- Ask for
- Limit assignment to work related to the business or made with company resources; attach a prior-inventions schedule.
EconomicsEmployment / compensation offer
Clawback / repayment
Repayment obligations can leave you owing money on your way out.
- What's normal
- Pro-rated, time-limited (≤12 months) and waived on termination without cause is reasonable.
- Ask for
- Pro-rate over 12 months and waive on termination without cause or for good reason.
EconomicsEmployment / compensation offerVenture term sheet
Option exercise window
A short post-departure exercise window forces you to fund the strike price (and tax) immediately or forfeit vested options.
- What's normal
- 90 days is the common default; 5–10 years is founder- and employee-friendly.
- Ask for
- Extend to 5–10 years, or at least 12 months for options vested at least two years.
EconomicsEmployment / compensation offer
Vesting cliff
A long cliff means you get nothing if you leave before it.
- What's normal
- A one-year cliff on a four-year schedule is standard.
- Ask for
- Reduce the cliff to 12 months or less.
EconomicsEmployment / compensation offer
Severance
Severance is the safety net if you're let go without cause.
- What's normal
- One month per year of service, with a floor of 2–3 months for senior roles, is a common ask.
- Ask for
- Ask for at least 3 months' base plus benefits continuation.
Term & exitEmployment / compensation offer
Broad 'cause' definition
A loose definition of 'cause' lets the company fire you without severance or vesting for almost any reason.
- What's normal
- 'Cause' should be limited to fraud, felony, gross misconduct and uncured material breach, with notice and a cure period.
- Ask for
- Limit 'cause' to fraud, felony, gross misconduct and uncured material breach, with 30 days' notice to cure.
EconomicsEmployment / compensation offer
Discretionary bonus
A bonus in the company's sole discretion is an aspiration, not compensation — you can't enforce it.
- What's normal
- Bonuses tied to stated, measurable criteria are enforceable.
- Ask for
- Tie the bonus to written, measurable targets and a payment date.
IP & ownershipFreelance / services agreement
IP assignment timing
If IP transfers on creation rather than on payment, a client who never pays still owns your work.
- What's normal
- IP should transfer on receipt of final payment; the client gets a limited licence until then; you keep pre-existing tools and portfolio rights.
- Ask for
- IP assigns on receipt of final payment; a limited licence applies until then; pre-existing IP and tools are excluded.
Term & exitFreelance / services agreement
Unlimited revisions
'Until satisfied' is unbounded scope on a fixed fee — the classic freelance trap.
- What's normal
- Two or three revision rounds per milestone, with further rounds billed at an agreed hourly rate.
- Ask for
- Cap at two revision rounds per milestone; further rounds billed hourly.
Term & exitFreelance / services agreement
Revision cap
A written revision cap keeps a fixed fee fixed.
- What's normal
- Two or three rounds per milestone.
Term & exitFreelance / services agreementSaaS / vendor / commercial contract
Termination for convenience
If only the client can walk away, you can lose the rest of the engagement — and the income — with days' notice.
- What's normal
- Termination for convenience should be mutual, or paired with payment for work done plus a kill fee (commonly 15–30% of the remaining fee).
- Ask for
- Make it mutual, or add payment for all work performed plus a kill fee of 25% of the remaining fee.
PaymentFreelance / services agreement
Payment terms
Long payment terms make you the client's bank.
- What's normal
- Net 15–30 is standard for freelancers; net 45 is the outer limit.
- Ask for
- Net 15 or net 30, a 30–50% deposit, and a late fee of 1–1.5% per month.
ControlFreelance / services agreement
Exclusivity
Exclusivity stops you from taking other work while you're engaged — it should be paid for.
- What's normal
- Exclusivity is uncommon for contractors; if agreed, it's usually compensated and time-limited.
- Ask for
- Delete it, or limit it to direct competitors for the term and pay a retainer.
Term & exitFreelance / services agreement
Open-ended scope
Vague scope language lets requests grow without the fee growing.
- What's normal
- Scope should be defined by a deliverables list; anything beyond it is a change order.
- Ask for
- Define scope by a deliverables list; further work needs a written change order.
IP & ownershipFreelance / services agreement
Portfolio rights
The right to show your work is how a freelancer wins the next client.
- What's normal
- Portfolio rights are a standard carve-out.
PaymentFreelance / services agreement
Deposit / upfront payment
An upfront payment aligns incentives and covers your risk.
- What's normal
- 30–50% upfront is common for fixed-fee projects.
Term & exitSaaS / vendor / commercial contractFreelance / services agreement
Auto-renewal
Auto-renewal with a long notice window locks you into another term if you miss a date.
- What's normal
- Renewal terms of 12 months or less with 30 days' notice, and a reminder from the vendor, are customer-friendly.
- Ask for
- Cut the notice window to 30 days, cap renewals at 12 months, and require the vendor to send a renewal reminder.
PaymentSaaS / vendor / commercial contractFreelance / services agreement
Annual price increase
Uncapped or high annual uplifts compound quickly.
- What's normal
- Increases capped at CPI or 3–5% per year are customer-friendly; above 7% is aggressive.
- Ask for
- Cap annual increases at the lesser of CPI or 5%.
PaymentSaaS / vendor / commercial contract
Unilateral price change
The vendor can reprice mid-term, leaving you no budget certainty.
- What's normal
- Prices should be fixed for the term and change only at renewal, with notice.
- Ask for
- Fix prices for the initial term; changes only at renewal with 90 days' written notice.
Term & exitSaaS / vendor / commercial contractFreelance / services agreementEmployment / compensation offergeneral
Unilateral amendment
If the other side can rewrite the contract at will, every other protection in it is provisional.
- What's normal
- Amendments should need both parties' written agreement.
- Ask for
- Amendments require mutual written consent.
LiabilitySaaS / vendor / commercial contract
Limitation of liability
The cap decides how much you can recover if the vendor's failure damages your business.
- What's normal
- 12 months of fees is the usual cap, with carve-outs (uncapped or super-capped) for data breach, IP indemnity, confidentiality and gross negligence.
- Ask for
- Cap at 12 months of fees; carve out data breach, IP indemnity, confidentiality and gross negligence.
DataSaaS / vendor / commercial contract
Use of your data for AI / product improvement
Your confidential data may be used to build the vendor's product — and, indirectly, your competitors'.
- What's normal
- Vendors should use customer data only to provide the service; training rights need explicit opt-in.
- Ask for
- Add: 'Vendor shall not use Customer Data to train or improve any model or service except for Customer.'
Term & exitSaaS / vendor / commercial contract
Service levels and remedies
Credits that are your 'sole and exclusive remedy' cap what you can recover for downtime.
- What's normal
- 99.9% monthly uptime, credits scaled to the miss, plus a right to terminate on repeated failures.
- Ask for
- Add a termination right after repeated SLA misses; credits shouldn't be the sole remedy.
PaymentSaaS / vendor / commercial contractFreelance / services agreement
Minimum commitment / non-refundable
Committed spend and non-refundable fees stay payable even if the product isn't delivering.
- What's normal
- Refunds should be available on vendor breach or SLA failure.
- Ask for
- Add a pro-rata refund on termination for vendor breach.
Term & exitSaaS / vendor / commercial contract
One-sided termination
If only the vendor can walk away, you may lose a system your business depends on with little notice.
- What's normal
- Termination for convenience should be mutual, with a long notice period and transition assistance.
- Ask for
- Make it mutual, with 90 days' notice and transition assistance.
LiabilityAny document
Unlimited liability
Unlimited liability means one claim can exceed everything the deal is worth.
- What's normal
- Liability should be capped (commonly at fees paid or 12 months of fees), with narrow carve-outs.
- Ask for
- Cap liability at fees paid in the prior 12 months; keep carve-outs narrow.
LiabilityAny document
Broad indemnity
A broad indemnity makes you pay for the other side's losses, including ones they cause.
- What's normal
- Indemnities should be mutual, limited to third-party claims arising from your breach, and capped.
- Ask for
- Make it mutual, limited to third-party claims from your breach, and subject to the liability cap.
ControlAny document
One-sided assignment
If only they can assign the contract, you may end up bound to a counterparty you never chose.
- What's normal
- Assignment should need consent from both sides (with an exception for a sale of the business).
- Ask for
- Assignment requires the other party's consent, except to a successor of the whole business.
LiabilityAny document
Mandatory arbitration / class waiver
Mandatory arbitration and class waivers narrow your options if there's a dispute.
- What's normal
- Arbitration in a neutral venue with the cost split is common; class waivers are contested.
- Ask for
- Neutral venue, costs split, small-claims carve-out, and no class waiver.
Term & exitAny document
Perpetual confidentiality
An obligation that never expires is an obligation you must track forever.
- What's normal
- Confidentiality typically lasts 2–5 years after termination; trade secrets can be indefinite.
- Ask for
- Limit to 3 years after termination, except for trade secrets.
LiabilityAny document
Liquidated damages / penalties
Pre-set penalties apply whether or not the other side actually lost anything.
- What's normal
- Liquidated damages must be a genuine pre-estimate of loss and proportionate.
- Ask for
- Delete, or tie to a reasonable pre-estimate of actual loss with a cap.
ControlAny document
'Sole discretion' language
'Sole discretion' removes any standard you could hold the other side to.
- What's normal
- Discretion should be exercised reasonably and in good faith.
- Ask for
- Replace with 'reasonable discretion, exercised in good faith'.
SecurityAny document
Possible AI-targeted hidden instruction
Text addressed to an AI or automated reviewer, rather than to a human counterparty, can be a deliberate attempt to make automated contract review skip or misjudge a clause.
- What's normal
- Legitimate contracts never need to instruct a reader's software; this pattern has no market norm because it should not be present at all.
- Ask for
- Remove the passage; if you didn't put it there, ask the other party why it's in the document.
Clauses a reasonable document usually contains. If the document never mentions them, Clarity says so.
Minor
Pro-rata / participation rights
Without pro-rata rights, you and existing small holders can't keep your percentage in later rounds.
Ask for Grant pro-rata rights to existing investors and major holders.
Major
Vesting acceleration
Vesting with no acceleration means an acquisition can strip unvested founder equity.
Ask for Add double-trigger acceleration on a change of control.
Minor
Anti-dilution terms
The term sheet is silent on anti-dilution; the definitive documents may default to something worse.
Ask for State broad-based weighted-average anti-dilution explicitly.
Major
Severance
There's no severance or notice pay if you're let go without cause.
Ask for Ask for 3 months' base plus benefits continuation on termination without cause.
Minor
Termination notice
No notice period means termination can be immediate.
Ask for Add a mutual 30–60 day notice period.
Minor
Prior-inventions / own-time carve-out
Without a carve-out, the company may claim inventions you made before or outside work.
Ask for Attach a prior-inventions schedule and exclude own-time inventions unrelated to the business.
Major
Post-termination exercise window
The equity grant doesn't state how long you have to exercise after leaving.
Ask for Ask for a 5–10 year exercise window, or at least 12 months.
Major
Kill fee / termination payment
If the client cancels, there's no guarantee you're paid for work done or for the slot you held.
Ask for Add payment for all work performed plus a kill fee of 25% of the remaining fee.
Minor
Late-payment fee
There's no cost to the client for paying late.
Ask for Add a late fee of 1–1.5% per month after the due date.
Major
Revision limit
With no revision limit, a fixed fee has no ceiling on the work.
Ask for Cap at two revision rounds per milestone; extras billed hourly.
Minor
Portfolio rights
Without portfolio rights you may not be able to show the work you were paid to make.
Ask for Reserve the right to show the work in your portfolio after delivery.
Major
Payment schedule / deposit
A single payment at the end means you carry all the risk.
Ask for Ask for a 30–50% deposit and milestone payments.
Major
Data return / deletion on exit
Nothing says you can get your data back — or have it deleted — when the contract ends.
Ask for Add export in a standard format within 30 days of termination and certified deletion afterwards.
Major
Uptime commitment
There's no uptime commitment, so downtime has no contractual consequence.
Ask for Add a 99.9% monthly uptime SLA with service credits.
Minor
Limitation of liability
With no cap, liability defaults to the law — which can be unlimited.
Ask for Add a mutual cap at 12 months of fees with standard carve-outs.
Minor
Termination for cause with cure period
There's no route to exit for the vendor's material breach.
Ask for Add termination for uncured material breach after 30 days' notice.
Minor
Price-increase cap
Nothing limits how much the vendor can raise prices at renewal.
Ask for Cap increases at the lesser of CPI or 5%.