Most people say you should focus on term sheets. From my experience, that's not the best approach. I've seen startups stumble because of this obsession. Here's what really matters when you're investing.
The Counterintuitive Truth
In term sheets, the best practitioners often do less, not more.
The lesson: most founders overthink this and underspend on execution. It sounds simple. It's incredibly hard to execute.
The Reality Nobody Talks About
A lot of the advice on term sheets rests on assumptions that made sense five years ago. The world has moved on.
The first thing to understand is that you need to move fast and break things. I've seen this play out across dozens of companies. The pattern is unmistakable.
Many teams spend months on the wrong path before realizing that customer feedback is the only metric that matters. Once they make the switch, everything changes.
The Framework That Actually Works
Here is a simple framework for evaluating term sheets. It's not complicated, but it requires discipline.
Step 1: you should focus on one thing and do it exceptionally well
This is where most people go wrong. They skip this step entirely and jump straight to execution. Don't do that.
Step 2: most founders overthink this and underspend on execution
Once you have the foundation right, this becomes much easier. I've watched founders struggle with this for months when the answer was staring them in the face.
Step 3: Iterate relentlessly
Nothing works perfectly the first time. The companies that get term sheets right treat it as an ongoing process, not a one-time project.
Real Talk: What Actually Matters
Here is what actually matters in term sheets.
First, execution speed beats perfection. Every time. Companies rarely fail because they moved too fast on term sheets. Many fail because they moved too slowly.
Second, measure everything. If you can't measure it, you can't improve it. Set up tracking from day one, even if it's basic.
Third, talk to your users. It sounds obvious, but many founders make decisions about term sheets in a vacuum. Get out of the building. Talk to real people.
This connects to broader themes around SPVs, rolling funds, term sheets that I've been thinking about a lot lately.
What's Next
Best practice in term sheets is changing fast. What worked last year might not work next year. That's both the challenge and the opportunity.
My advice: stay curious, stay humble, and stay close to the people who are actually doing the work. Read less thought leadership and do more experiments. Talk to fewer consultants and more practitioners.
If you're building in this space, the best time to get term sheets right is before you need to. Don't wait for a crisis to force your hand.
I'll keep sharing what I learn. This stuff matters too much to keep to myself.
Frequently Asked Questions
Q:Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
Q:What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
Q:How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.