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- Raise like a PRO - Founder's Guide to Term sheets...
Raise like a PRO - Founder's Guide to Term sheets...
...so you know what you're signing up to.
David Levine
March 27, 2025
Welcome back to Raise Like a Pro dear reader! ; a newsletter to help you do exactly that.
I'm David, and unlike most people giving fundraising advice, I don't just talk about raising money – I’ve been there as a founder and now I spend my day raising money for startups all over the world from investors all over the world.
I've closed millions in new investment in the past few months alone for startups - and I’m going to teach you how to do it without needing someone like me. This is my playbook; the operational, tactical and yes - sometimes boring stuff you need to do each and every day to raise your round.
No nonsense, no fluff and definitely no fuzzy sheep.
Table of Contents
My promise to you
Every piece of advice in this newsletter comes from actual experience: deals I've closed, terms I've negotiated, and strategies I've refined through real-world application.
I'm not here to give you startup platitudes or generic advice. Instead, you'll get practical, actionable tactics that you can implement immediately in your fundraising journey.
The goal? To help you raise money faster, at better valuations, while protecting your interests and your time.
– David
Don’t Go Wibble: understand the terms you sign up to
Getting that first (and subsequent) termsheet is exciting —but it’s easy to get caught up in the moment and go all “wibble”. The deal terms you agree to can have a huge impact on what you actually walk away with, even if your startup ends in a big exit.
Take FanDuel for example. They raised over $400 million, but when the company was sold for $465 million in 2018, the founders and early team made next to nothing. Why? Because of liquidation preferences—a clause that let investors get their money back (often with a return) before anyone else saw a penny.
Or look at Waze, which sold to Google for over $1 billion. Sounds like a dream, right? But by the time the deal closed, the founders’ stakes had been heavily diluted through funding rounds. Some made tens of millions, which isn’t nothing—but far less than you’d expect from a billion-dollar sale.
The point is: understanding terms like liquidation preference, anti-dilution, and control rights isn’t just a “nice to have.” It’s the difference between life-changing money and walking away empty-handed.
You don’t need Baldrick’s pencils or underpants - just our simple and easy-to-understand guide to the terms investors are going to lob at you.
💰 Deals done this week
Manchester-based Firenze, a fintech disrupting Lombard-lending, raised a £2.5m Seed round from Outward VC, Form Ventures, Portfolio Ventures and Fink Family Office as well as angels Andi Kazeroonian, Manuel E, Patrick Newton, Leo Ringer, Will Brooks, Will Martin and the Fink Family Office.
This round also saw strong participation from existing angels and welcoming new angel investors Mark Dynes, Christopher Kraft and Henrik Wetter Sanchez. Read more.
London-based Qlarifi, a real-time BNPL credit database startup, has raised £1.4M in a pre-seed round as stricter BNPL regulations loom in early 2025. The UK Treasury has signaled new legislation requiring affordability checks and credit reporting for BNPL services to prevent consumer debt spirals. Qlarifi provides underwriting data for BNPL lenders by analysing consumer transaction histories, helping them make better-informed lending decisions. The round was backed by HoneyComb Asset Management, Carthona Capital, and angel investors, including former Australian rugby star John Eales, read more.
London-based Rival, a 3D content generation startup, has emerged from stealth with a $4.2M pre-seed round led by Speedinvest, alongside New Renaissance Ventures and high-profile angel investors. Founded in June 2023, Rival enables users to convert 2D videos into immersive 3D experiences using its proprietary AI-powered model. The platform is Meta Quest-compatible, supporting Apple Vision Pro and Pico headsets in development. The company plans to expand its team of ML/AI engineers and grow its U.S. presence. Rival was co-founded by Alexander Oppermann (ex-GIC) and Konrad Melzer (former German FBI security software engineer), read more.
Baldrick’s famous Wibble scene from Blackadder - if you know, you know!
Getting all Nitty Gritty with term sheets
Too many founders outsource understanding term sheets to lawyers. Nothing could be more important - if you get this wrong or make the wrong decision the years, blood, sweat and tears you put into your business could be for nothing.
Liquidation Preferences: The Investor's Safety Net
This is a biggie. Liquidation preferences determine who gets paid first when a company sells or goes bust. There are two main flavours:
Non-Participating Preferences
Think of this as the "either/or" option. Investors can either:
Get their initial investment back first, or
Convert to common shares and split the proceeds like everyone else
Example time: An investor puts in £5 million for 20% of the company. If the company sells for £50 million, they'd be silly to take just their £5 million back. They'd convert to common shares and grab their 20% slice (a tasty £10 million).
But if things go south and the company only sells for £15 million, they’ll choose to take their £5 million back first, leaving less for everyone else.
Participating Preferences
This is the "have your cake and eat it too" option. Investors get their money back first AND get to share in the leftover pie. It's great for investors, not so great for founders.
Using the same example: If the company sells for £50 million, the investor would get their £5 million back, plus 20% of what's left (£9 million). That's £14 million total – more than their fair share based on equity alone.
Founders usually fight hard against participating preferences because they can seriously eat into their potential payday.
Please please PLEASE - do not agree to participating preferences.
Drag Along and Tag Along: The "We're All in This Together" Clauses
Drag Along
This lets majority shareholders force the minority to join in on a sale. It's to stop small shareholders from blocking a good exit opportunity.
Key points to haggle over (although rarely worth doing so):
What percentage of shareholders need to agree?
How much notice do minority shareholders get?
Are there any limits on the types of deals this applies to?
Tag Along
This is the flip side, protecting minority shareholders. If the big fish are selling, the little fish get to join in on the same terms. It's especially important for founders who might end up as minority shareholders down the line.
Things to consider:
Can shareholders sell all their shares or just a portion?
How quickly do they need to decide to tag along?
What happens if the buyer doesn't want to purchase the extra shares?
Board Stuff: Who's Calling the Shots?
The board of directors is where the big decisions happen. In early stage deals, you'll typically see:
1-2 seats for founders/management
1 seat for each major investor
Maybe an independent director or two
As the company grows and takes on more investment, the board usually changes to reflect this.
How Decisions Get Made
There are usually three types of decisions:
Everyday stuff: Simple majority vote
Big strategic moves: Might need a bigger majority, often including at least one investor director
Super important things: These need explicit approval from investor directors
The "super important" list often includes:
Issuing new shares
Taking on big debts
Changing the core business
Hiring or firing top executives
Approving major deals or exit opportunities
Investors also like to have other ways to keep tabs on things, like:
Veto rights on certain decisions
Regular financial reports
Protection against dilution
Extra control if the company misses important targets
Other Bits and Bobs
Valuation: How Much Is This Thing Worth?
This is often where the real negotiation happens. Founders tend to be optimistic, investors more cautious. The final number depends on the market, how well the company's doing, the team's track record, and good old-fashioned negotiating skills.
Anti-Dilution: Protecting Investor Shares
This kicks in if the company raises money at a lower valuation later on. It adjusts the price of the investor's shares to protect them from losing value. The most common type is called "weighted average" – it's a bit complicated, but it's fairer than the more aggressive "full ratchet" method.
Pre-emption Rights: First Dibs on New Shares
This gives existing investors the right to buy into future funding rounds to keep their percentage ownership. It's a way for them to double down on successful investments and avoid getting diluted.
Founder Vesting: Earning Your Shares
Investors usually want founders' shares to vest over time (often 3-4 years). It's to make sure founders stick around and stay motivated. There's usually a "cliff" where nothing vests for the first year.
Information Rights: Keeping Investors in the Loop
Investors want to know what's going on. This usually means:
Monthly updates
Quarterly financials
Yearly audited accounts
The right to pop in and check things out
Exit Rights: Planning for the Exit
Investors are always thinking about how they'll get their money back (and then some). This might include:
The right to force the company to buy back their shares after a certain time
Ability to make the company go public (more common in the US)
Options to sell shares back to founders or the company in certain situations
Conclusion
Early stage venture deals are a balancing act between protecting investors and giving founders room to grow the business. The exact terms depend on the market, the company's stage, and how much leverage each side has in negotiations.
For founders, it's crucial to understand these terms to avoid getting backed into a corner. For investors, it's about managing risk in a high-stakes game.
The trend is moving towards more standardised deals, especially for early stage investments. This helps cut down on legal faff and speeds things up. But there's still plenty of room for negotiation, and the balance of power shifts as market conditions change.
As companies grow and raise more money, these deals often get more complex and investor-friendly. The best outcomes happen when everyone finds a sweet spot that protects investors while still giving founders a shot at the big time.
🤖 AI in fundraising
Fundraising is time-intensive and distracts from what matters - building the business. Emerging AI tools will help you save time whether summarising investor requests, preparing for meetings, or managing due diligence materials.
Here are a couple of tools that have been a game changer for me recently:
Shortwave - An AI-native email assistant that helps you write and edit emails efficiently and supercharge your productivity. Try it here
FeedHive - An AI-powered social media management tool that helps you schedule posts, analyse engagement, and identify trends. Try it here
📖 Interesting things I’ve been reading….
About Raise Like a Pro
Raising a funding round isn’t rocket science. It’s not even brain surgery. But it's incredibly time-consuming, HARD and emotionally challenging.
As a founder, your time is better spent building product, finding product-market fit, signing up customers, and building your team. Yet fundraising demands an enormous amount of your attention and energy.
I've witnessed countless founders struggle with this balance. They get stuck in the cycle of endless pitch meetings, confusing feedback, and the dreaded "no's" that seem to pile up without explanation. Even successful companies like Canva, now valued at $25.5 billion, started with their CEO Melanie Perkins hearing "no" over 100 times before getting that crucial first "yes."
I'm going to share my exact playbook – the same one I use to raise millions for startups across the world. This isn't about theory or inspiration. Instead, you'll get:
The actual processes I use to close deals.
Step-by-step morning routines for effective fundraising.
Real email templates that get responses.
Meeting scripts that convert to term sheets.
Pipeline management techniques that close deals.
The stuff you really need to know so you don’t get screwed by investors.
My days are spent navigating negotiations with every type of investor: angels looking for their next big win, syndicates pooling capital for bigger deals, and VC firms conducting thorough due diligence.
I'll share insights from all these perspectives, helping you understand how each type of investor thinks and what they're really looking for.
What's coming up
In the next issues, we'll dive into a whole bunch of stuff including:
How to structure your fundraising for maximum efficiency
The exact outreach strategies I use to get investor meetings
Common terms to watch out for (and how to negotiate them)
Ways to create competitive tension in your raise
Due diligence preparation that speeds up closing
Raise like a Pro is what David Levine does every single day though this business Glenluna Ventures. An exited founder, he raises money each and every day for founders all over the world from investors all over the world.