Getting to the negotiation table is a massive win, but as any experienced founder knows, the “yes” is only the beginning of a high-stakes chess match. In this article, fundraising expert Alex Arnot breaks down why successful fundraising is about building the foundations for a long-term relationship

Congratulations on getting to the table. Negotiating with investors is less about “winning” a battle and more about architecting a long-term marriage where you still own the house. As a founder, your leverage is your vision and your growth metrics; their leverage is the capital you need to scale. Here are ten tips to help you navigate the term sheet without losing your shirt – or your sanity.

1. Focus on “Control” as much as “Valuation”

Founders often obsess over the post-money valuation, but protective provisions and board seats usually matter more. A high valuation with a 2x liquidation preference and board veto rights can be more restrictive than a lower valuation with founder-friendly terms.

2. Understand the Liquidation Preference

Standard is 1x non-participating. This means investors get their money back first in a sale, or they convert to common stock and share the proceeds. Avoid “participating” preferences (often called “double dipping”), where they get their investment back plus their percentage of the remaining pool.

3. Build Competition (The “FOMO” Factor)

The best way to get better terms is to have more than one term sheet. Investors are herd animals; if they know a rival firm is circling, they are much more likely to drop “predatory” clauses to win the deal.

4. Know Your “Walk-Away” Number

Before you enter the room, decide on your hard limits for dilution and governance. If you don’t know your floor, you’ll likely find yourself agreeing to “just one more” small concession until you’ve lost control of your company.

5. Standardise Your Documents

Whenever possible, start with industry-standard documents. If an investor brings a 50-page custom contract full of “standard” clauses you’ve never heard of, be wary.

6. Keep the Option Pool “Post-Money”

Investors will often insist that the employee option pool (usually 10-15%) be created before they invest. This dilutes you, not them. Try to negotiate a smaller pool or argue for an increase after the round to minimise your immediate dilution.

7. Watch the “Anti-Dilution” Clauses

Stick to Broad-Based Weighted Average anti-dilution. This protects investors if you have a “down round” later. Avoid “Full Ratchet” clauses, which are extremely punitive to founders and can essentially wipe out your equity if the company’s valuation drops even slightly.

8. The “Board of Directors” Balance

In early rounds, aim for a 3-person board: You, a Co-founder, and one Independent. As you grow, move to a 5-person board (2 Founders, 2 Investors, 1 Independent). Avoid giving investors a board majority early on.

9. Don’t Negotiate Against Yourself

When an investor asks, “What valuation are you looking for?” try to pivot back to the capital needed to hit your next milestones. Let them put the first number on paper. Once they’ve committed a lead price, you have a baseline to work from.

10. Vet the Lead Partner, Not Just the Firm

You aren’t just partnering with “Sequoia” or “A16z”; you are partnering with a specific individual who will sit on your board. Do “reverse due diligence.” Call founders they’ve worked with—specifically the ones whose startups failed. How the investor acts when things go south is the true test of their value.

Alex Arnot specialises in positioning high-growth tech companies as the most competitive targets in the M&A market.

Join us for a live session:
On Wednesday, 11th March at 12:00 PM (GMT), Alex will lead alongside AIN’s Xavier Ballester, an exclusive session on designing a high-value exit. Whether you are planning for next year or the next five, learn how to exit on your own terms with a clear, engineered roadmap. Click here to register