About This Template
When you receive term sheets from multiple investors in a fundraising process, comparing them is not straightforward. Term sheets are long, dense, and written in legal language designed to be comprehensive rather than comparable. The valuation headline tends to dominate the founder's attention, while the governance, liquidation, and protective provisions — which can be far more consequential over the life of the investment — receive less scrutiny than they deserve.
This template creates a structured, side-by-side comparison of up to three term sheets across all the dimensions that matter: valuation and economics, investment terms, liquidation rights, governance, founder protections, and deal mechanics. Each term is accompanied by a description, your ideal position, a notes and red flags column, and a scoring framework. The Economic Modelling tab shows you the actual founder proceeds under each term sheet at three different exit scenarios, making the financial impact of each set of terms concrete rather than theoretical.
The template is designed to be used in conjunction with a solicitor — it is an analysis and decision-making tool, not a substitute for legal advice. But it provides the CFO and founders with a structured analytical framework that improves the quality of the decisions made and the instructions given to lawyers.
What's Included
- Instructions tab — Overview of the template and guidance on each section
- Term Sheet Comparison tab — Side-by-side comparison across valuation, investment terms, liquidation rights, governance, founder protections, and deal mechanics for up to three investors
- Economic Modelling tab — Exit scenario analysis showing founder and investor proceeds under each term sheet at three exit valuations
How to Use This Template
- Name your investors. Replace "Investor A", "Investor B", and "Investor C" in row 1 of the Term Sheet Comparison tab with the actual fund names. You can hide unused investor columns if you have fewer than three term sheets.
- Fill in your ideal terms first. Before entering investor terms, complete the "Your Ideal" column. This forces you to articulate your ideal position on every term before you are anchored by what investors have proposed. Common ideal positions: 1× non-participating liquidation preference, no participating preferred, double-trigger vesting acceleration, drag-along threshold of 75%+.
- Enter valuation terms. Input pre-money valuation, investment amount, and share class for each investor. The post-money valuation and price per share will calculate automatically if you link to your cap table. Note whether the option pool is being refreshed pre or post-money — a post-money pool is significantly more founder-friendly.
- Record investment terms carefully. Anti-dilution provisions vary significantly: weighted average broad-based is market standard and relatively benign; full ratchet is highly investor-friendly and should be pushed back on strongly. Pay-to-play provisions require existing investors to participate in future rounds or lose their preferences.
- Analyse liquidation terms. This is the section that most materially affects founder outcomes. Enter the liquidation preference multiple (1× or 2×), whether it is participating or non-participating, and whether there is a participation cap. Model the difference in the Economic Modelling tab.
- Review governance terms. Board composition (number of seats, who appoints), investor consent matters (veto rights), and information rights are the three governance provisions that have the most day-to-day impact on how you run the company. Flag any consent matters list that is broader than market standard.
- Check founder protection terms. Vesting acceleration on exit (single trigger vs double trigger), drag-along threshold, and ROFR provisions directly affect founders in an exit process. Double-trigger acceleration (change of control plus termination without cause) is the market standard founder position.
- Model exit scenarios. In the Economic Modelling tab, enter three exit valuations (e.g. £10m downside, £30m base case, £100m upside). The model calculates proceeds for founders and each investor class under each term sheet. This makes the economic difference between, say, 1× non-participating and 2× participating concrete and quantifiable.
- Score and weight terms. Use the Notes / Red Flags column to flag provisions that are significantly investor-friendly or non-standard. A red flag in the liquidation or governance section is typically more important than one in the deal mechanics section.
- Share with your solicitor. Share the completed comparison with your lawyer before any negotiation call. Use it to define your must-have positions, your negotiating positions, and the items you are willing to concede in exchange for improvement on priority terms.
Frequently Asked Questions
What is a participating preferred and why does it matter?
Participating preferred gives investors a liquidation preference (typically 1× or 2× their investment) and then also allows them to participate pro-rata in any remaining exit proceeds alongside ordinary shareholders. Non-participating preferred gives investors the choice between taking their preference or converting to ordinary shares — they cannot do both. At low exit valuations, participating preferred means investors receive a disproportionately large share of proceeds. At high exit valuations, the difference narrows because investors typically convert to ordinary shares anyway. The template's Economic Modelling tab will show you the exact impact at your expected exit scenarios.
What is the difference between 1× non-participating and 2× participating?
This is one of the most important economic comparisons to make when comparing term sheets. A 1× non-participating preference means the investor gets back 1× their investment before ordinary shareholders receive anything, and then converts and participates pro-rata. A 2× participating preference means the investor gets 2× their investment back first and then also participates pro-rata in remaining proceeds. At a £20m exit on £2m invested, a 1× non-participating investor receives the higher of £2m or their pro-rata share; a 2× participating investor receives £4m plus pro-rata on the remainder. The difference to founders at modest exit values can be very significant.
Which governance rights should I push back on most firmly?
The consent matters list — the list of company actions that require investor approval — is the governance provision that most frequently causes operational friction. Market standard consent matters typically cover: raising further funding, making acquisitions above a threshold, changing the articles, issuing new shares, and paying dividends. Non-standard additions that should be resisted include: consent required for any hire above a certain salary, approval of the annual budget, approval of any material contract, and consent for any executive departure. These provisions, if exercised, can make it very difficult to run the business without constant investor involvement in day-to-day decisions.
What is a drag-along provision and what threshold is market standard?
A drag-along provision allows shareholders holding above a threshold percentage to force all other shareholders to sell in an exit, removing the ability of minority shareholders to block a transaction. This protects acquirers and ensures that an agreed exit can complete without holdout risk. A drag-along threshold of 75% (requiring a supermajority including the board and majority of ordinary shareholders) is standard and balanced. Thresholds significantly lower than 75% — particularly where investors can drag without the founders' consent — are founder-unfriendly and should be resisted.
What is single versus double trigger vesting acceleration?
Vesting acceleration on exit determines how many unvested shares vest when the company is acquired. Single-trigger acceleration means all unvested shares vest automatically on a change of control, regardless of whether the founder is retained. Double-trigger acceleration means unvested shares only vest if there is both a change of control and the founder is terminated without cause (or resigns for good reason) within a specified period after closing. Double-trigger is the market standard. Single-trigger can be problematic because it may disincentivise acquirers who want founders to remain — and because it may be seen as a windfall rather than earned compensation.
Should I always take the highest valuation term sheet?
Not necessarily. Valuation is one variable in the overall economic and governance package. A higher headline valuation with 2× participating preferred, a broad consent matters list, and aggressive anti-dilution provisions may leave founders with less money in an exit and less control of the business than a lower valuation term sheet with 1× non-participating preferred and market-standard governance. The Economic Modelling tab in this template is specifically designed to help you make this comparison quantitatively, not just qualitatively. The right term sheet is the one with the best overall combination of economics, governance, and investor quality — not simply the highest number on the pre-money line.
