The key insight this week
Venture term sheets come in a wide variety of flavors. Lately, those term sheets are tasting a bit more sour for founders lucky enough to receive one.
We aggregated three key deal clauses across the thousands of rounds completed on Carta each quarter. It turns out that all three provisions have been turning more "investor-friendly" over the past 6 months, but the degree of change varies widely.
You can find a quick refresher on the terms themselves here.
Cumulative dividends
Our first non-standard term. These dividends function like interest that accrues on debt. Cumulative just means that these are earned over time, whether or not it's declared by the board.
1 in 10 deals on Carta had cumulative dividends in Q4 2022. That's the highest such percentage in the last five years.
Liquidation multiplier
How much of a VC's investment are they guaranteed to get back before everyone else gets paid out in the event of an exit?
Again, this clause is becoming more common. Still under 7% of deals, but rising fast.
Participation
The most onerous of deal clauses. Essentially this is the ability to get paid out first AND share in remaining profits with other shareholders (the infamous double-dip).
The percentage of deals with participation has stopped falling but has yet to rise back towards 2019 levels. That's a silver lining, but one to watch moving forward.
Baseline: founders need to brush up on their negotiation skills. These conversations are more likely to include non-standard terms than 2021.
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Peter Walker
DISCLOSURE: This communication is on behalf of eShares, Inc. dba Carta, Inc. ("Carta"). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. © 2026 Carta. All rights reserved. Reproduction prohibited.
