This tool is designed to provide a **preliminary and indicative assessment** of your Term Sheet's health, identifying critical clauses and imbalance risks. Answer as accurately as possible for the most reliable estimate.
Legal Disclaimer: The result of this simulation is purely **educational and informational**, based on market benchmarks. **It does not constitute legal, tax, or financial advice in any way.** It is essential to consult qualified professionals before making decisions based on this data.
The Investment Health Triage is a **free and anonymous tool** that analyzes your Term Sheet to assess the balance between founder and investor. Using international **Venture Capital benchmarks**, it provides a **Financial Health Score** to immediately highlight toxic clauses that could compromise your future control or equity.
The key clauses for a founder fall into three areas: **Economics** (like Liquidation Preference and Anti-Dilution, which protect your exit value), **Governance** (veto rights and Board control, which define who makes daily and strategic decisions), and **Founder** (Leaver and Vesting clauses, which govern your tenure and exit price). Analyzing these areas helps you understand if the deal is founder-friendly or investor-friendly.
**Absolutely not.** The Investment Health Triage results are based on the interpretation of standard VC market practices and are provided for **educational and guidance purposes only**. The tool helps you understand what to negotiate. For formal drafting or negotiation, it is **always mandatory** to consult a **lawyer specialized in Venture Capital** (not an accountant or notary) for binding legal advice specific to your case.
"Zero-Knowledge" guarantees your **total anonymity and confidentiality**. The data you enter into the Triage is processed **only in the server's temporary memory** and is immediately destroyed when the session closes. No input data is saved or profiled in any permanent database.
In Venture Capital transactions, it is standard practice for investors to require that the target company holds full and undisputed ownership of the economic exploitation rights to the software. Any uncertainty on this point is often considered a blocking issue ("Red Flag") during Due Diligence.
To formalize the transfer of intellectual property from the founders (natural persons) to the company, legal practice primarily uses two instruments:
The "Liquidation Preference" is a clause that determines the order and amount in which the proceeds of a liquidation event (e.g., sale of the company) are distributed among shareholders.
In an exit valued at 10 million, with an investment of 5 million for 20%:
"Leaver" clauses regulate what happens to the shares of a founding partner who stops working for the company. The goal is to prevent non-operational partners from holding significant shares ("dead equity").
The classification as "Good" or "Bad" Leaver drastically affects the redemption price of the shares:
An overly broad definition of "Bad Leaver" (which might include, for example, simple dismissal for failing to meet targets) can expose the founder to the risk of losing their stake due to normal business events, thus losing the value created up to that point.
Veto rights allow a minority (the investor) to block certain company decisions. Market practice usually distinguishes between two levels of vetoes:
Extending veto rights to ordinary management can slow down decision-making processes, requiring constant formal approvals for daily business activities. In negotiations, these vetoes are often mitigated by introducing value thresholds (e.g., "expenses over 50,000 outside the budget") to preserve the operational autonomy of the management.
The Anti-Dilution clause protects the investor if the company is forced to conduct a future financing round at a **lower Pre-Money valuation** than the previous round (a so-called Down-Round). This mechanism allows the investor to receive additional shares for free, or at a lower conversion price, resetting the value of their original investment.
The mechanism considered **market standard** and fairest is:
The mechanism that triggers the "Kill Switch" in our triage is:
When an investor (especially a fund or business angel with a specific network and know-how) promises to provide support services (e.g., access to new clients, strategic mentorship, future fundraising support), this component is defined as “Smart Money”.
Investor Reverse Vesting is a mechanism aimed at formalizing and binding these promises. It works similarly to founder vesting: the investor receives a portion of their shares as "consideration for services," and these shares are subject to a repurchase clause by the company if the promised services are not delivered or do not achieve agreed-upon results.
The main goal is **alignment of interests**. If the Term Sheet only guarantees the investor (through Leaver clauses for the founder) but does not bind their performance in services, the startup might only receive “Dumb Money” (money without added value) while having given up a significant part of its equity.
The (C) Only verbal promises ('best effort') option is risky because:
The **Fair Market Value (FMV)** is the estimated value of an asset (in this context, startup shares) that would result from a transaction between a willing buyer and a willing seller, both informed and consenting, acting freely and without coercion.
In Term Sheet clauses, FMV is crucial for:
It is essential to distinguish FMV from a punitive value:
To determine the FMV of an early-stage startup, the most common methods include:
The Drag-Along clause is a right that allows a qualified majority of shareholders to **force the sale** of shares held by all other shareholders (including minority founders) to a third-party buyer.
Its main purpose is to ensure that, in the presence of a good purchase offer for 100% of the company, minorities cannot block the Exit transaction, thus making the investment bankable.
The crucial points to negotiate to protect founders are the activation mechanisms:
The Drag-Along should always guarantee **equal treatment** (pari passu): all shareholders must sell their shares under the same economic conditions, ensuring the investor does not receive better side deals at your expense.