Raising capital is a milestone moment—but for many founders, term sheets can feel like a maze of jargon, hidden risks, and investor-friendly clauses. Get them wrong, and you might give away too much of your company too early.
At our recent Founders Bay Workshop, we invited Ellisha Blechynden, a San Francisco-based corporate attorney specializing in startups and venture capital, to break down the essentials of negotiating term sheets. With years of experience guiding founders through equity financings, Ellisha shared tactical advice on how to protect your equity, avoid common pitfalls, and build strong investor relationships.
💡 Key Takeaways
🔹 Safes vs. Convertible Notes vs. Preferred Stock
Safes are quick and low-cost but can chip away at equity faster than founders realize. Convertible notes give investors more protections, while preferred stock is heavily negotiated and sets the foundation for future rounds.
🔹 Know Your Investor Rights
From liquidation preferences to information rights, founders should understand which provisions are “market” (like 1x non-participating liquidation preferences) versus investor overreach. Getting these terms right early on avoids painful renegotiations later.
🔹 Cap Table & Diligence Readiness
Investors scrutinize your cap table and IP. Before fundraising, ensure all equity grants, option pools, and invention assignment agreements are properly documented—messy records can kill momentum fast.
🔹 Leverage Investor Relationships
The best term sheet isn’t always the one with the highest valuation—it’s from investors who add strategic value, open doors, and support your company’s long-term growth.
✅ Why It Matters for Founders & Leaders
Avoid costly dilution from poorly structured safes.
Close rounds faster with clean, diligence-ready documentation.
Build lasting trust with investors by negotiating fairly and strategically.
Ellisha reminded us that term sheets aren’t just legal formalities—they’re a blueprint for your company’s future. With the right preparation, founders can turn term sheet negotiations into a moment of strength, not stress.
👉 Want to learn more? Connect with Ellisha on LinkedIn or check out her boutique corporate practice for startup-focused legal support.
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