A term sheet is a milestone. Founders still need to understand the diligence, documents, ownership changes, and closing steps that stand between agreeing on headline terms and receiving investment capital.

In our October 14 Wise Counsel session, Derrick L. Maultsby Jr., Managing Associate at FBT Gibbons, walked founders through venture financing and acquisition conversations. The practical lesson was to understand the process early enough to participate thoughtfully, ask better questions, and prepare for the obligations a deal creates.

FBT Gibbons sponsors Wise Counsel throughout October 2026. This article draws on that sponsored conversation and adds the primary-source distinctions linked below. It is general education; your advisors should apply the documents, facts, and applicable law to your transaction.

Start by knowing which transaction you are discussing

An investment through a SAFE, a priced equity financing, and the sale of a business create different processes and expectations. Calling all three “raising money” can hide decisions that deserve attention.

Y Combinator’s SAFE resources explain that a SAFE is not a loan: it has no interest or maturity date, and its conversion depends on its terms. A valuation cap and a discount concern conversion economics; they should not be casually treated as interchangeable with the valuation negotiated in a priced round. Read the particular form and model the resulting ownership.

Derrick warned against accepting successive SAFEs without a financing strategy. Different caps, discounts, and side letters can create obligations whose effect becomes clearer later. Before taking another check, ask what milestone the money funds and how the proposed instrument fits the next financing.

Treat the term sheet as the beginning of a closing plan

In Derrick’s simplified description of a venture deal, the term sheet starts a period when legal diligence, remaining business diligence, and preparation of financing documents move forward together.

Those workstreams answer different questions. Business diligence examines the investment case. Legal diligence examines the company’s records, rights, and obligations. The definitive documents establish the actual transaction and the relationships that follow it.

The NVCA’s model financing documents include a stock purchase agreement, investors’ rights agreement, and voting agreement, among other documents. These are useful references for understanding the document set, not a substitute for selecting and reviewing the terms appropriate to a particular company.

Ask your counsel and lead investor to make the process visible:

• What remains open, and who owns each answer?

• Which documents and approvals are needed?

• What conditions must be satisfied before closing?

• Which obligations begin before closing, at closing, or afterward?

• What would cause the expected timeline to change?

Derrick discussed example diligence windows from his practice. Use such examples for planning conversations, not as promises that your financing will close within a fixed number of days.

Read the side arrangements alongside the main agreement

A small check can come with requests that affect future decisions. In the session, Derrick pointed to side letters and requests for information or governance rights as terms founders should evaluate rather than accept automatically.

The amount invested is only part of that evaluation. Ask what a proposed right requires, how long it lasts, how it interacts with existing commitments, and what it could mean in the next round. A clear explanation of why a request does or does not fit your financing strategy is more useful than agreeing because the company needs cash urgently.

Ownership and governance also deserve separate attention. A percentage on a cap table does not explain every decision right. If preserving the company’s direction matters to you, discuss board composition and other governance provisions with counsel. Derrick also emphasized choosing investors whose approach and values fit the company you are building.

Review the ownership picture before the money arrives

Derrick described preparing a pro forma cap table during the financing process: an illustration of what ownership is expected to look like after the transaction.

Ask to see the assumptions. Which SAFEs or notes convert? What happens to existing holders? Which proposed rights sit outside the headline economics? Have changes made during negotiation reached the current model and final documents?

Fundraising also brings securities-law questions. A SAFE’s short form does not remove those questions. The SEC’s Form D guidance ties that notice requirement to specified exempt offerings, including Rules 504 and 506 of Regulation D. Do not infer that every SAFE uses the same exemption or filing path; confirm the applicable requirements with counsel.

For the preparation that comes before this stage, see Investment Readiness Starts Before the Term Sheet.

Acquisition conversations need their own plan

Derrick distinguished a venture financing term sheet from a letter of intent in an acquisition. In the latter discussion, founders should understand the proposed transaction structure, diligence, exclusivity or no-shop provisions, and any obligations after closing.

An asset purchase and a stock purchase are different structures. Avoid reducing that choice to a blanket claim that one is always better or that an asset purchase eliminates every liability. Bring the actual contracts, licenses, tax questions, and obligations to your advisors.

Confidentiality is part of the process too. Derrick’s useful rule was to share the information needed for the purpose of the conversation. An NDA does not make unlimited disclosure prudent. Identify the next decision, understand the recipient and safeguards, and disclose deliberately.

Arrive with a direction and useful questions

You do not need every answer before speaking with a lawyer. You can make the conversation more useful by explaining what the business does, what you have already agreed to, the decision you face, and where you are uncertain.

Bring the current documents and a short list of open questions. Discuss the scope, fees, budget, and communication expectations. When a deal is active, keep a single list of outstanding items, the responsible person, and the next action.

The aim is to understand what you are agreeing to, see what remains unresolved, and work with the right people to move the transaction forward.

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