Deal Terms
Exploding Term Sheet
A term sheet with an artificially short deadline designed to pressure founders into accepting before they can shop the deal to other investors.
An exploding term sheet is an investment offer that includes a very short acceptance window — sometimes as little as 24-72 hours — intended to prevent the founder from soliciting competing offers. While investors frame this as urgency or conviction, it's often a pressure tactic used to prevent price discovery and limit the founder's negotiating leverage.
In Practice
The VC partner called at 9pm with a term sheet that expired at noon the next day, telling the founder 'This is our best and final offer.' The founder's advisor recognized the exploding term sheet tactic and negotiated a 5-day extension, during which two other firms submitted competing offers at higher valuations.
Why It Matters
Exploding term sheets are a red flag about the investor's character and negotiation style. Founders should be wary of investors who use pressure tactics before the relationship even begins — it often signals how they'll behave as board members.
VC Beast Take
The VC community has generally moved away from exploding term sheets as founders became more aware of the tactic and began blacklisting firms that used them. However, they still occur in competitive markets where investors feel pressure to lock up deals quickly.
Related Concepts
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