From spinoffs to fundraising to M&A, founders need transparent deal terms

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With recession rounds approaching, startup founders have far less leverage to close deals than they did in 2021. If you’re new to the fundraising game, the changing market will require an accelerated class on less favorable terms, such as liquidation benefits. The information may have been forgotten during the last cycle, but at least it is available, which is less the case for university chapters and M&A. Let’s dive in. Anna

Investor Protection Returns

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When it comes to fundraising for startups, there are far more open discussions about deal terms these days than there were 10 years ago. But given that founders only get a few coin tosses in their lives, compared to the many deals VCs and lawyers see, it’s more important than ever for entrepreneurs to understand what they’re signing up for.

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“In an economic downturn, the terms of the deal look different,” says my colleague. Rebecca Shkutak wrote. The lawyers she spoke to predicted that some clauses meant to protect investors would pay off, which also echoes what we’re hearing through vine. Among the provisions to watch out for are liquidation perks, pay-per-play, and dilution protection, including the dreadful full ratchet.




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