Louis Lehot Authors Explainer on ‘Dirty’ Term Sheets in Venture Capital

This article originally appeared on Foley on January 13, 2025: Louis Lehot Authors Explainer on ‘Dirty’ Term Sheets in Venture Capital

Foley & Lardner LLP partner Louis Lehot authored the Westlaw Today article, “Understanding ‘dirty’ term sheets in venture capital,” offering insight on startup fundraising term sheets and what to watch out for when raising capital.

‘Dirty’ terms, Lehot writes, are “certain provisions in term sheets that can be particularly disadvantageous for founders and stakeholders.” These can include high liquidation preferences benefitting investors at the expense of other parties, participating preferred stock, accruing and cumulative dividends, and veto rights.

Lehot also explores instances when term sheets are deployed, the adverse consequences overreaching provisions in term sheets can yield, and steps that can be taken to avoid or mitigate such terms.