They may make their investment contingent on your raising additional money by a certain date, and they may want the option to cash out at a particular price when your second funding round comes up. All of these possibilities could have serious consequences for your company. The terms you accept determine how future investors will value your company. A term sheet in the hands of an unsophisticated attorney or entrepreneur can prevent them from raising another dime. A qualified attorney who makes sure that you protect your idea is a must, Goodman says.
Entrepreneurs feel like their new company is their child.
They're madly in love with it, and they see the money and convince themselves to go for it without being prudent about the terms and conditions that being put on that money. Ask our small-business experts. Because of the volume of mail, we won't be able to respond to all questions personally. Let us know what you think. The McGraw-Hill Companies Inc. All rights reserved.