> In that case, what would be the key difference between a clean term vs a messy one?
In my experience, terms with lots of if-then conditionals are the most common flag. The last "messy" term sheet I saw had an unusually long diligence period. Predictably, the investor "found" a bunch of problems at the 11th hour and pulled out, leaving the startup in a financial lurch.
Anything that differs from standard docs should be _highly_ suspect, assuming you can get ahold of some.
As a lower bound, I've never seen terms presented on Shark Tank that weren't off-the-wall insane. :D
> How would a first time founder tell the difference?
>By talking to other founders, advisors, and their attorneys.
I 100% agree with you (and I have such contacts to help me out), but I lament the fact that many founders will lack such contacts to give them a sanity check. Perhaps one can reach out to people about it, but without a preexisting network to tap, I am afraid that many will simply accept the bogus terms rather than deal with the discomfort of reaching out for help.
In my experience, terms with lots of if-then conditionals are the most common flag. The last "messy" term sheet I saw had an unusually long diligence period. Predictably, the investor "found" a bunch of problems at the 11th hour and pulled out, leaving the startup in a financial lurch.
Anything that differs from standard docs should be _highly_ suspect, assuming you can get ahold of some.
As a lower bound, I've never seen terms presented on Shark Tank that weren't off-the-wall insane. :D
> How would a first time founder tell the difference?
By talking to other founders, advisors, and their attorneys. This book was useful when I was approaching the first term sheets I ever saw: http://www.amazon.com/Term-Sheets-Valuations-Intricacies-Big...