Secure the capital
Term sheets are where founders quietly give away the company. Have someone on your side of the table who reads dozens of these a year — not just your lawyer marking it up.
What this step covers
- Term sheet negotiation: valuation, dilution, liquidation preference, control rights.
- Diligence management: keep the process moving without losing leverage.
- Closing and post-close: drawdown conditions, covenants, reporting cadence.
The detail
Term sheet terms that quietly cost founders the most
- Liquidation preference — 1x non-participating is fair; 2x participating is punitive.
- Anti-dilution — broad-based weighted-average is standard; full-ratchet is hostile.
- Pre-money vs post-money — clarify which the valuation refers to before you sign.
- Option pool — investors often ask you to enlarge the pool pre-money (you take the dilution, not them).
- Drag-along & tag-along — protects minority but also forces you into an exit you may not want.
- Board seats & vetoes — count both. A 1-seat investor with 12 vetoes effectively controls the company.
Closing checklist
- Definitive agreements signed (SHA / SPA / Loan agreement)
- Conditions precedent fulfilled (board approval, regulatory consents)
- Stamp duty paid where applicable (1% on share capital increase)
- Share certificates issued and shareholder register updated
- Funds received in the company bank account (not your personal account)
- BRS filings: BOF1 update, CR1 amendments, new share allotments
- First reporting pack scheduled with the investor
Many term loans release in tranches against milestones. Map exactly what you must achieve to unlock each drawdown before signing — and budget for the cash gap if a milestone slips.
Frequently asked
Do I need a lawyer for the term sheet?+
Yes. The term sheet is mostly non-binding, but the binding clauses (exclusivity, no-shop, confidentiality) tie your hands for months. A 2-hour legal review is essential.
How long from term sheet to money in the account?+
60–90 days is typical for equity. 30–60 days for bank debt. Multiply by 1.5 if it's your first time with that funder.
The information in this guide is provided for general guidance only and is subject to change. Fees, timelines, and regulatory requirements in Kenya are updated regularly. Before acting, please confirm details with the relevant authority (KRA, eCitizen, BRS, county government, or other regulator) or speak with a qualified MyBiashara advisor. MyBiashara is not liable for decisions made solely on the basis of this content.
