Absurd Terms In Seed Funding
Raising a seed round for the first time is like navigating a minefield.
Here are the 3 most absurd terms I've encountered:
- Conditional Disbursement
Some investors wanted to release funds based on revenue milestones, completely missing the point that raising capital is meant to fuel growth. I'm still not sure why these individuals were involved in venture investment in the first place.
- Immediate Repayment Clause
Imagine the pressure of knowing an investor could request their entire investment back at any moment. I wonder if anyone would even consider such a deal.
- Personal Guarantees
The icing on the cake. Asking founders to use their personal life as collateral, as if we weren't already committing everything to our startup.
Despite our desperate need for funding, accepting these conditions felt like signing a pact with the devil. It was hard to turn down any offer of money, but these terms were a bridge too far.
I've seen my fair share of bizarre term sheets, but these three clauses stand tall.