Members of the founding team who are regarded as redundant or not particularly strong are having their shares cut back as a condition to funding. Founders are being forced to subject a higher percentage, or in some cases, all of their founder shares to vesting. They are also being given much less credit, and in some cases no credit, for time already spent with the company. Options are less likely to be granted to lower-level employees. Valuations are significantly lower than they were just six months ago.
Some investors insist on debt instruments with warrants or conversion rights.
Budgets and body counts are receiving closer examination and monitoring as VCs try to better manage the burn rates at their portfolio companies. In this regard, pay scales are less generous than before. Staged funding is back in vogue. Investors are no longer writing huge checks, but rather limiting investment rounds to amounts sufficient to allow a company to achieve the next realistic set of milestones. All these factors heighten the need for a solid angel round before an early stage company turns to VCs.