Category: Fundraising

A term sheet is mostly about control and downside

Valuation gets the attention, but the clauses below quietly decide who controls the company and who gets paid first if things go sideways.

The clauses that matter most

• Liquidation preference: aim for 1x non-participating; avoid participating “double dip”.
• Anti-dilution: prefer broad-based weighted average over full ratchet.
• ESOP pool: note whether it is created pre-money (dilutes you) or post-money.
• Board composition: who controls votes after this round?
• Pro-rata rights: investors’ right to maintain ownership in future rounds.
• Drag-along / tag-along: rules for forced and protected exits.
• Founder vesting: typically 4 years with a 1-year cliff.
• Information & inspection rights.
• Right of first refusal (ROFR) on transfers.
• Protective provisions / reserved matters.
• Conversion terms.
• Exclusivity / no-shop period.

Negotiate terms, not just valuation. A high valuation with a 2x participating preference can be worse than a lower one with clean terms.

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Three ways to take in early money

At the earliest stage you usually choose between a SAFE, a convertible note, or a priced equity round. Each trades off speed, cost and certainty.

SAFE (Simple Agreement for Future Equity)

• Fast and cheap, no interest or maturity
• Converts to equity at the next priced round
• Watch valuation caps and discounts

Convertible Note

• Debt that converts to equity
• Carries interest and a maturity date
• More investor protection than a SAFE

Priced Round

• You set a valuation and issue shares now
• More legal cost and time
• Cleaner cap table and clarity for everyone

In India, note that pure SAFEs need careful structuring under company and FEMA rules, especially with foreign investors. Many local deals use CCPS (compulsorily convertible preference shares) for priced rounds.

Use SAFEs/notes to move fast on a small round; switch to a priced round once you have real traction and a lead investor.

Need help putting this into action? Book a free 15-minute call with a Vaishnav Catalyst specialist.

The job of a deck

Your deck exists to get the next meeting, not to close the round. Keep it tight, visual and honest. Eleven slides is plenty for a seed raise.

The 11 slides

• 1. Vision / one-liner
• 2. Problem
• 3. Solution
• 4. Product (show it)
• 5. Market size (bottom-up)
• 6. Business model
• 7. Traction
• 8. Competition / why now
• 9. Team
• 10. The ask & use of funds
• 11. Contact

What investors actually scan for

• A real, painful problem
• Evidence you can build and sell
• Honest, bottom-up market sizing
• A reason this is the right team at the right time

Traction beats narrative. One slide of real usage data is worth five slides of market theory.

Need help putting this into action? Book a free 15-minute call with a Vaishnav Catalyst specialist.

What a cap table tracks

Your capitalisation table records who owns what: founders, ESOP pool, angels and funds, plus convertible instruments not yet converted. It is the source of truth for ownership and dilution.

Mistakes that scare investors

• Too many small angels with no lead (a “messy” table)
• Founders with uneven splits and no vesting
• Verbal promises of equity with nothing documented
• Dead equity — large stakes held by people no longer contributing

Good habits

• Put founder vesting in place early
• Document every grant and SAFE/note
• Model dilution before you sign a term sheet
• Keep one canonical, up-to-date file

Investors read your cap table as a signal of how you run the company. Keep it clean and they relax.

Need help putting this into action? Book a free 15-minute call with a Vaishnav Catalyst specialist.

Be ready before the term sheet

Once a term sheet is signed, due diligence begins. Founders who have a tidy data room close faster and negotiate from strength.

What goes in the data room

• Incorporation docs, MOA/AOA, board and shareholder resolutions
• Cap table and all SAFE/note/share agreements
• Audited financials, management accounts, tax filings
• Key customer and supplier contracts
• IP assignments and trademark/patent filings
• Employment agreements and ESOP documents
• Statutory and ROC compliance records

A clean data room is a growth hack. It signals operational maturity and shortens the path to money in the bank.

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Valuation is negotiation, informed by method

At the earliest stage there is little revenue to anchor on, so valuation reflects team, market, traction and competition for the deal as much as any formula.

Common approaches

• Comparables: what similar startups raised at a similar stage
• Scorecard / checklist: adjust a base valuation for team, market, product
• VC method: work back from a target exit and required return
• DCF: rarely meaningful pre-revenue, more useful later

Round size and dilution matter more than the headline number. Optimise for the right partner and ~15–20% dilution, not a vanity valuation.

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Fundraising is a sprint, not a side task

A drawn-out raise signals weakness and drains focus. Run it as a concentrated process with momentum.

The 90-day arc

• Days 1–20: deck, data room, target list, warm intros
• Days 21–55: first meetings in batches to create urgency
• Days 56–75: partner meetings, term sheet negotiation
• Days 76–90: due diligence, docs, signing and wire

Run meetings in parallel, not in series. Concentrated interest creates the competition that gets you a term sheet.

Need help putting this into action? Book a free 15-minute call with a Vaishnav Catalyst specialist.