Knowledge
Zain Jaffer- Here’s the actual term sheet I signed when raising my $2M seed round — and what I wish more founders understood.
It was late 2011.I was a first-time founder. No product. No revenue. Just a pitch deck… and a tourist visa.
A name-brand US VC sent over this convertible note term sheet.After constant rejection in the UK, I was thrilled — and almost signed it blindly.
Here’s what was in it:
💸 $4M valuation cap
📉 10% interest
⚠️ 3x liquidation preference
🧾 25% discount on the next round
⏳ 1-year maturity
🛑 No prepayment allowed 👀 Board-level access rights for a $100K note
🧨 MFN clause locking terms for 180 days
🎯 Post-maturity conversion at a board-set price
Our (very expensive) lawyers told me it was a good deal. That I was lucky.But then I showed it to a second-time founder — and he called it out immediately: “These terms are full of landmines. You need to push back.”
So I did. Reluctantly. And only on three things:
💸 Cap: $4M → $5M
📉 Interest: 10% → 8%
⚠️ Liquidation: 3x → 2x
To my surprise, the VC agreed almost instantly. And I walked away thinking: I should’ve pushed harder.
💡 I’m sharing the actual (redacted) term sheet, with the most problematic clauses highlighted — so other founders can see what these deals really look like.
All the other terms stayed in. It was too late to ask for more changes.And if my company hadn’t taken off like a rocketship, this document could’ve buried it.
Fortunately, we raised a Series A shortly after and got rid of all the bad terms (you can do that when you have leverage).TLDR: Terms > Logos. Own your cap table. Ask the uncomfortable questions. Negotiate like your future depends on it — because it does.
