Series A Term Sheet The Ultimate Deal Checklist

Series A Term Sheet Checklist: 50+ Deal Points

last updated: Feb 19, 2026
You have a term sheet in hand, or you’re expecting one. It looks like standard paperwork, but unlike the handshake deals of your Seed term sheet template, this document is a marriage contract that dictates how you get fired and how you get paid.

TL;DR: The Cheat Code

A Series A Term Sheet Checklist is a breakdown of the binding and non-binding clauses in a priced equity round (usually $5M–$15M) that converts your Seed SAFEs/Notes into Preferred Stock. It shifts your relationship with capital from "unsecured debt" to "ownership with governance."

Key Bullets:
  • Benchmark: Expect 18%–20% dilution (excluding the option pool shuffle). Recent data from SaaStr's analysis shows median Series A dilution hovering around 20%. If they ask for 30%, you are distressed or bad at math.
  • Rule: 1x Non-Participating Liquidation Preference is the hill you die on. Anything else is predatory.
  • Warning: The "Option Pool Shuffle." If the pool comes out of the pre-money valuation, you pay for it 100%. If post-money, investors share the cost.

How to read this: Use the tables below to audit your term sheet line-by-line.

Glossary

  • Pre-Money vs. Post-Money: Pre-money is what your company is worth today. Post-money is Pre-money + Investment. Crucial: Make sure you know which one the option pool is calculated on.
  • Liquidation Preference: The order in which people get paid at an exit. "1x Non-Participating" means investors get their money back or their % share, not both.
  • Protective Provisions: A list of operational actions (selling the company, raising debt, changing board size) that require investor approval. See the NVCA Model Legal Documents for the industry standard list.
  • Drag-Along Rights: A clause that forces minority shareholders (often you, eventually) to sell their shares if the majority (investors) votes to sell the company.
  • Pay-to-Play: A penalty clause where investors lose their preferred status (and rights) if they don't participate in future funding rounds.

The Checklist

Instruction:
This checklist is broken into three categories: Economics (Price), Control (Power), and Hygiene (Exit). Compare your term sheet against the "Standard" column. If you see items from the "Red Flag" column, stop negotiating and call your lawyer.

Part 1: Economics (The Price)
Deal Point
Standard (Good)
The "Ask" / Red Flag
Why It Matters
Valuation
Fair market (typically $20M–60M Pre-money)
"Flat" or "Down" from Seed cap (Rare in healthy cos)
Determines your dilution immediately.
Option Pool
10–15% of Post-Closing Capitalization
Red Flag: 20%+ or calculated on Post-Money without clarity.
Investors want this large and in the pre-money to dilute you only, not them.
Liquidation Preference
1x Non-Participating
Red Flag: >1x (e.g., 2x) or "Participating Preferred" (Double Dipping).
Participating means they get their money back plus their % share. It kills your upside.
Dividends
"When and if declared" (Non-cumulative)
Red Flag: Cumulative Dividends (e.g., 8% compounding).
Cumulative dividends act like high-interest debt that piles up until exit.
Anti-Dilution
Broad-based Weighted Average
Red Flag: "Full Ratchet"
Full Ratchet means if you sell stock lower later, they get all their value repriced. It wipes you out.
Pay-to-Play
None (or basic)
Red Flag: Aggressive penalties for missing pro-rata.
Rare in Series A. Keeps investors honest in future downturns.
Part 2: Control (The Power)
Deal Point
Standard (Good)
The "Ask" / Red Flag
Why It Matters
Board Composition
2 Founders, 1 Investor (2-1 Control)
Red Flag: 2 Founders, 2 Investors, 1 "Independent" (Loss of Control).
If you lose board control, you can be fired from your own company.
Protective Provisions
Standard NVCA list (Fundamental changes only)
Red Flag: Veto on hiring, firing, or budget spend <$100k.
Investors need veto on selling the company, not on buying a laptop.
Voting Rights
Pro-rata (1 share = 1 vote)
Red Flag: Super-voting rights for investors.
Keep voting aligned with ownership %.
Drag-Along
Requires Board + Majority Preferred vote
Red Flag: Triggered by Investors only (without Board approval).
Don't let them force a sale you don't want just to get liquidity.
Founder Vesting
Credit for time served (e.g., 25% vested upfront)
Red Flag: Full "Re-vesting" (Clock resets to 0).
You built the company; you shouldn't start from zero vesting.
Part 3: Hygiene (The Exit & Admin)
Deal Point
Standard (Good)
The "Ask" / Red Flag
Why It Matters
Registration Rights
Standard piggyback rights (IPO)
Red Flag: Demand registration rights too early/aggressive.
Allows investors to force you to list shares publicly.
Information Rights
Quarterly financials, Annual budget
Red Flag: Weekly reporting or full audit rights for small checks.
Don't create a reporting burden that distracts from execution.
Right of First Refusal
Standard (Company first, then Investors)
Red Flag: Investor block on all secondary sales.
Limits your ability to sell secondary shares for liquidity later.
Exclusivity (No Shop)
30–45 Days
Red Flag: >60 Days
Ties your hands while they do diligence. Keep it short.
Legal Fees
Cap at $30k–50k (Investor Counsel)
Red Flag: Uncapped legal fees.
You pay their lawyers. Cap it or they will bill infinite hours.

Benchmarks

Before you negotiate, know what "standard" looks like in the current market.

  • Dilution: 18% – 20% (Median).
  • Option Pool: 10% – 15% (Calculated on Post-Money, taken from Pre-Money).
  • Legal Fees: Total bill ~$80k–$120k. You pay your counsel (~$60k) plus the investor's counsel (capped at $30k–$50k).

Sample Math: The Option Pool Shuffle
Here is why the Pre-Money Pool is the oldest trick in the book. You might think you are selling 20% of your company, but the math says otherwise.
  • Scenario: $10M Investment on $40M Pre-Money ($50M Post).
  • The Term: "10% Option Pool ($5M) to be established prior to closing."
  • The Reality: The 10% pool ($5M value) is carved out of your $40M pre-money before the investment hits.
  • Your Valuation: Effectively drops to $35M ($40M nominal - $5M pool).
  • Dilution: You take the full 10% hit. The investor buys 20% of the final pie ($10M / $50M), untouched by the pool creation.
  • Fix: Negotiate the pool size based on a hiring plan (e.g., "We only need 8% for the next 18 months").

Term Sheet: Series A vs Seed

Comparing your previous round to this one helps visualize the jump in complexity. See our guide on Term Sheet vs SAFE for a deeper dive.
Feature
Seed (SAFE/Note)
Series A (Priced Round)
Valuation
Cap (Not a real price)
Explicit Price Per Share
Governance
None (Usually)
Board Seat + Veto Rights
Legal Fees
$5k–15k
$50k–100k+
Timeline
Days
30–45 Days

Risks: The Deal Killers

While most terms are negotiable, some are existential threats. Prepare your founder questions carefully if you see these:
  • The Double Dip (Participating Preferred): Investors get their money back AND their percentage share. This is non-standard (used in <4% of deals) and greed-driven.
  • The Board Coup: Accepting a 2-2-1 board structure (2 Founders, 2 Investors, 1 Independent) often means the Independent sides with the money. You lose control.
  • The Blockade: Overly broad protective provisions that let a minority investor veto your budget or hiring plan.

Conclusion: The Revenue Reality Check

A "Perfect" Series A Term Sheet protects your downside, but it doesn't guarantee your upside. Don't let legal wins distract you from the real goal: $10M ARR. Sign the deal that gives you control and enough runway to execute, then get back to work. Revenue is the only leverage that matters for Series B.
Take the 90-second audit to calculate your probability of hitting $10k MRR in the next 90 days.
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FAQ
  • You:
    How long does it take to close after signing the term sheet?
    Guide:
    Typically 30–45 days. This period is for "Confirmatory Diligence" and drafting the long-form legal docs (Stock Purchase Agreement, Investor Rights Agreement). Do not spend the money until it hits the bank.
  • You:
    Should I accept "Participating Preferred" stock?
    Guide:
    Almost never. "Participating" allows investors to get their money back plus their share of the remaining proceeds (double dipping). Standard market practice (96%+ of deals) is Non-Participating. See data from Cooley GO or similar firms to back up your pushback.
  • You:
    What is a standard option pool size at Series A?
    Guide:
    The market standard is usually 10–15% of the post-money capitalization. If you have a large unallocated pool from the Seed round, argue to use that first to reduce the new pool size.
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