It’s crazy how term sheet traps can wipe out founders like that. The participating preferred mess and the corporate VC info rights weapon really stuck out—scary stuff. Appreciating the protection tips you shared.
Given the disappearing series A, I think the seeds stapping trend has more viability. I think what we're witnessing is a break in how startups do funding.
I remember watching an episode of the Silicon Valley TV show where a founder fell prey to the valuation death trap. I had no idea so many other kinds of risks could exist on a term sheet. It just feels as if bootstrapping is generally such a better way (at least initially) to build a company. You keep complete control and don't risk such wealth transfer structures early on.
I literally started a law firm to protect against this. Many lawyers say that they can help you, but they don’t know the chess being played above their heads.
best book to learn about term sheets
https://a.co/d/7F6xEG2
Great recommendation!
Yeah, it's a really good one!
ohh thanks!!
It’s crazy how term sheet traps can wipe out founders like that. The participating preferred mess and the corporate VC info rights weapon really stuck out—scary stuff. Appreciating the protection tips you shared.
Founders should always do their DD on investors as well...
Always! it's a mandatory step!
Given the disappearing series A, I think the seeds stapping trend has more viability. I think what we're witnessing is a break in how startups do funding.
I agree! If startups are reaching a few $M in ARR within months of launching, the future of venture will change.
One trend I see changing is founders wanting distribution capital (investors with massive reach) instead of traditional investors.
Time will tell!
I don't think the series A is gone... it's just a handful of AI startups who hit the ground running.
But Yes, I'm a firm believer seed-strapping is here to stay. The big question for me
(and founders) is whether seed-strapping will lead to massive outcomes (e.g. unicorns) or sold for much less. TBD.
This is must-read wisdom for any founder navigating early funding.
Term sheets aren’t just paperwork, they’re power dynamics in disguise.
Appreciate how you’ve broken down each trap into real consequences and actionable protections.
Thanks!
I remember watching an episode of the Silicon Valley TV show where a founder fell prey to the valuation death trap. I had no idea so many other kinds of risks could exist on a term sheet. It just feels as if bootstrapping is generally such a better way (at least initially) to build a company. You keep complete control and don't risk such wealth transfer structures early on.
initially yes, bootstrapping can work. But if you need to scale up fast VC funding can make a world of difference
100%
Many great learnings in here!
I literally started a law firm to protect against this. Many lawyers say that they can help you, but they don’t know the chess being played above their heads.
wow..