no-shop clause

Advanced 🚀 Startup / VC

Definition

A provision preventing startups from soliciting other offers while negotiating terms, ensuring you can't play investors against each other. The dating equivalent of 'we're exclusive now' after one coffee.

Example Usage

We signed a no-shop clause for 30 days, which became 60 days of 'just a few more questions' before they finally wired the money.

Origin

M&A terminology from the 1980s, adapted to venture financing in the 1990s

Fun Fact

No-shop periods are supposed to be 30-45 days but often extend indefinitely as investors conduct endless diligence, trapping desperate founders.

Source: M&A and venture capital term sheet provisions

Related Terms

Beginner

founder-friendly

A marketing term VCs use to describe their approach, supposedly indicating fair terms and supportive behavior. In practice, it often means 'we won't screw you quite as hard as the other guys.'

🚀 Startup / VC
Beginner

spray and pray

An investment strategy of making many small bets across countless startups, hoping a few will hit big enough to compensate for the inevitable carnage. The venture capital equivalent of buying lottery tickets in bulk.

🚀 Startup / VC
Advanced

adverse selection

The phenomenon where the worst investment opportunities are most aggressively marketed to investors, while the best deals are oversubscribed and hard to access. If they're begging you to invest, run.

🚀 Startup / VC
Beginner

term sheet

A non-binding document outlining the key terms of an investment deal—think of it as a letter of intent that's about as reliable as a Tinder profile. The real fun begins when lawyers turn these bullet points into a 60-page agreement.

🚀 Startup / VC
Intermediate

dilution

The soul-crushing moment when a startup issues new shares, and existing shareholders watch their ownership percentage shrink faster than a wool sweater in a hot dryer. While you still own the same number of shares, you now own a smaller slice of the pie—assuming the company actually grows enough to justify the dilution. It's the price founders pay for other people's money, and the reason early employees cry into their vested options.

🚀 Startup / VC
Advanced

Equity Dilution

The process by which your ownership percentage shrinks with each funding round until you own approximately as much of your company as you own of the Pacific Ocean. It's like splitting a pizza with more and more people, except you baked the pizza and now you get one olive.

🚀 Startup / VC

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