The term sheet is the negotiation. The 80-page Stock Purchase Agreement that follows is largely the term sheet's clauses written longer. If you are not winning the term sheet you are not winning the deal.
The price layer
Pre-money valuation: agreed value before the new round. Post-money: pre-money plus new investment. Investor's ownership: investment ÷ post-money. The option pool shuffle: increasing the option pool before the investment so that the dilution falls on existing shareholders rather than the new investor. A 5% pre-investment pool top-up shifts ownership materially.
Worked example: pre $40M, $10M raise, $50M post — investor owns 20%. If the founders agree to a $5M pre-money pool top-up, the pre is $40M including the new pool, founders own less, investor still owns 20%. The shuffle is worth real percentage points; founders should price it explicitly.
Liquidation preferences
1x non-participating preferred is the modern default — investors get either their money back or their pro-rata share of equity at exit, whichever is greater. Participating preferred ('double-dip') gives the investor their preference and their pro-rata share — far more aggressive. Higher multiples (1.5x, 2x) appear in down rounds and bridge financings. Chapter 22 walks the math.
Control: board, protective provisions, drag-along
Board composition: investors typically take 1–2 seats; founders typically retain 2–3 in early stages. Protective provisions: investor consent required for material acts (Chapter 26). Drag-along: lets a majority force a sale. Pro-rata rights: investor's option to participate in future rounds. Information rights: monthly financials, annual budget.
Anti-dilution and pay-to-play
Anti-dilution protects investors against dilution in down rounds — broad-based weighted average is standard, full ratchet is aggressive (Chapter 23). Pay-to-play converts an investor's preferred to common (or to a less-protected class) if they do not participate in future rounds — pushing investors to support the company through follow-ons rather than walk away.