Tactics + sample counter-offer email scripts.
Valuation is a number, but ownership is a plan. A strong term sheet balances price with structure—option pool, liquidation preferences, pro‑rata, and governance. This guide gives you cap‑table math, a negotiation flow, and copy‑paste counter‑offer emails so you can land the round without surprises.
Key takeaways: Optimise for post‑money ownership and option pool location, not sticker price alone. Trade structure for speed only when it preserves runway and control. Use a crisp counter‑offer email with a small, defensible valuation band and a data‑backed story.
Optimise for ownership and clean terms; trade structure before you over‑optimise price.
Anchor on post‑money ownership and pool location. Offer a tight valuation band and ask to shift value into round size or pro‑rata if needed.
Define your must‑haves (runway ≥18 months, ESOP post‑money, 1× non‑participating liquidation preference, standard pro‑rata). Counter with a small band (e.g., £14–16m post) and one or two alternative trades: larger cheque, clearer pro‑rata, or board seat structure.
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Share a one‑page before/after showing founder %, ESOP %, and new investor % at each valuation band.
Investors care about alignment and hiring capacity. Model the ESOP as post‑money to avoid hiding dilution on the founder side. Show ownership at close and after a realistic ESOP refresh before Series A.
Raising £3.5m. Bands: £14m, £15m, £16m post. ESOP post‑money at 12%. Ownership of the lead is 25.0%, 23.3%, 21.9% respectively; founders vary accordingly.
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Prefer a clean 1× non‑participating liquidation preference and standard pro‑rata over squeezing the last £1–2m of valuation.
If an investor insists on a higher pool pre‑money, that’s founder dilution—ask to move the pool post‑money or reduce size. Avoid participating preferences and complex ratchets at seed/Series A; they rarely age well.
Round size, board seat type (observer vs full), information rights cadence, and exact pool size/timing. Use these as levers to close.
1) Clarify goals and constraints. 2) Present a tight valuation band with rationale. 3) Offer 1–2 clean trades if needed; don’t reopen everything.
Keep email threads short and phone calls focused. Summarise in writing and update the cap‑table page after each change. If multiple firms are engaged, keep timelines honest rather than inventing pressure.
Keep it gracious, specific, and anchored to plan. Two concise templates follow—counter and acceptance.
Counter: “Thanks for the offer and enthusiasm. To fund 20 months of runway and our hiring plan, we’re targeting a £14–16m post‑money with ESOP post‑money at 12% and a clean 1× non‑participating preference. If helpful, we can flex round size by £0.5m or offer an observer seat to land there.”
Acceptance: “We’re aligned on price and structure (post‑money £15m; ESOP post‑money 12%; 1× non‑participating; pro‑rata). Attaching the updated cap‑table summary; excited to move to docs.”
Make your deck and data room feel instant: INP ≤200 ms, LCP ≤2.5 s, CLS ≤0.1; reserve space for embeds and compress hero images ≤150 KB.
Many partners review on laptops while travelling. Defer non‑critical scripts, preload fonts or use a system stack, and provide a fast, static cap‑table image with a link to download the model.
It signals conviction and reduces haggling.
Partners want a crisp rationale: runway target, hiring plan, conversion assumptions, and comparable ranges. A band (e.g., £14–16m post) framed by plan‑to‑profit or plan‑to‑Series A shows you’ve done the math. Add one paragraph on what changes if you raise +£0.5m or −£0.5m.
Include a one‑page ARR bridge, cohort snapshots, and a concise pipeline view. Point to signed LOIs or pilots if relevant; avoid vanity metrics.
Short cycles beat high prices.
Week 0: lead alignment on price and structure. Week 1: diligence pack opened; partner meeting. Week 2: term sheet issued; 48–72h to socialise. Week 3: confirm syndicate. Weeks 4–6: docs and closing. Longer timelines usually degrade certainty more than they improve price.
Delayed partner meeting, slow redlines, or repeated fishing for other leads are signs to reduce dependency on that buyer.
Local context can influence structure.
Some funds prefer onshore or free‑zone domiciles (DIFC/ADGM) with standard NVCA‑style terms. Spell out invoicing currency, tax, and hiring costs in AED/SAR to ground valuation in plan reality. If an investor pushes for a larger pre‑money ESOP, explain why post‑money preserves hiring capacity without masking dilution.
At seed/Series A, avoid participating preferences and heavy anti‑dilution. If required, ask for caps or sunset clauses.
Pre‑money pool surprises, participating prefs, and endless back‑and‑forth.
Fix by publishing a cap‑table one‑pager with post‑money ESOP, pushing back on participation, and limiting negotiation rounds to two concise iterations. Keep escalation paths clear (founder ↔ partner) to avoid telephone games.
Post‑money: value after new cash; determines investor % at close. ESOP: employee option pool; new or top‑up can be pre‑ or post‑money. Liquidation preference: return order to investors on exit; ‘1× non‑participating’ means your simplest, cleanest term. Super pro‑rata: right to take more than your pro‑rata in future rounds.
Run this before you reply to a term sheet.
Use comps to frame the plan—not to posture.
Pick a tight peer set with similar motion (SMB vs enterprise), ACVs, gross margins, and sales cycles. Point to 2–3 public or recently financed private comps to triangulate a sensible range, then pivot to why your plan deserves the band you proposed: repeatable pipeline sources, retention/cohorts, and product velocity. Comps support the story; they don’t replace it, and they shouldn’t be used to drag the conversation into edge‑case outliers.
Short answers on valuation and structure trades.
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