Three term sheet patterns I’m seeing in Q1 2026 that weren’t standard six months ago:
These patterns reflect a more nuanced market. Strong assets get favorable terms. Mediocre assets get structured.
1. Pro-rata rights for seeds are back After 18 months of Series A leads pushing back on seed pro-rata, we’re seeing accommodation again. The catch: it’s usually capped at 50% of the seed investment amount.
2. Milestone-based tranches More term sheets are including second-tranche provisions tied to specific ARR or hiring milestones. Not punitive — more like “deploy $4M now, $3M when you hit $3M ARR.” Founders who negotiate well are getting the milestone set at 6-month targets, not 12.
3. Board observer seats for operators Interesting trend: three term sheets this quarter included board observer seats specifically reserved for an operating advisor (not the VC). Signal that investors want operational oversight beyond their own expertise.
My take: The market is more nuanced than “tight” or “loose.” Strong assets are getting favorable terms. Mediocre assets are getting structured.