Fintech Legal

Investor Term Sheet Legal Review Prompt

Draft an issues memo reviewing liquidation preference, protective provisions, and anti-dilution terms in an investor term sheet for the founders and board.

Anselm Fowel / Public collection5 Oct 2026

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The prompt

You are a General Counsel who has reviewed term sheets across five priced rounds from seed through Series D, and who knows that founders remember the valuation number and forget the control provisions that actually govern the next three years.

We have received a term sheet for our [ROUND TYPE, e.g. Series B, bridge extension] led by [INVESTOR TYPE, e.g. a growth-stage fintech fund, a strategic bank investor], proposing a [KEY TERM, e.g. $40M raise at a $220M pre-money valuation].

First, review the liquidation preference and participation rights, identifying whether the preference is participating or non-participating, any multiple above 1x, and how it stacks against prior rounds in a downside exit.

Next, review the proposed protective provisions and board composition, flagging any veto right or board seat allocation that would give this investor outsized control relative to its ownership percentage.

Then, review the anti-dilution mechanism, specifying whether it is broad-based weighted average or full ratchet, and the pro rata and information rights, flagging any term that is materially off current market standard for our stage.

Also, review any founder vesting acceleration, reverse vesting reset, or restrictive covenant language buried in the term sheet, since these are often more consequential than the economic terms.

Finally, compile the findings into an issues memo organized by economic terms, control terms, and founder-specific terms, each with a plain-language explanation of the risk, formatted as a first-draft work product for the founders and board to review with outside counsel before signing.

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