‘Dirty’ term sheets

Raising money is hard. Raising money when things are not going well is even harder.

That doesn’t mean that every term sheet with a low valuation or tough demands is ‘dirty’ (as reading Breakit might make you believe).

There are dirty things like pushing the founder out and very short deadlines that in my mind always are dirty. In 99% of cases I’d put participating preferred liquidation preference as dirty, as in any normal fundraise more than 1x non-participating liquidation preference isn’t necessary.

But sometimes the situation is so bad that accepting terms that are normally considered dirty are better than going bankrupt. Because most often the alternative to accepting a ‘dirty’ term sheet is running out of money, not getting a ‘clean’ term sheet at an acceptable valuation.