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50 Questions: What are the key terms in a termsheet? (Part 2 of 2)

By on September 8, 2011

Together with Nic Brisbourne of The Equity Kicker / DFJ Esprit, I am writing a series of 50 questions you should ask when raising venture capital. We expect the series to run for a year, after which we will collate the answers into a book. We view this as a collaboration, so please comment to help make this series even more useful. This is #33 in the series.


In Part 1 of this post Nic said that the terms in a termsheet fall into four categories – those relating to economics, to control, the legally binding ones (exclusivity and costs), and everything else.  He then went on to write in a bit of detail about valuation, which is the most important of the economic terms. In this post Nic covers the other key economic terms; liquidation preference and anti-dilution, the most important control terms; board structure and protective provisions, and then finishes with a few words on exclusivity and cost.  These two posts together cover the most important clauses in a termsheet, and you should be able to tell whether a termsheet is attractive or not, but there is a lot that isn’t covered and they are no substitute for a good lawyer.

For more, go and read 50 Questions: What are the Key Terms in a Termsheet? – part 2 on the Equity Kicker.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com