Term sheet clause 6 of 25 · Economics
Dividends in a term sheet
In plain English: Payments to shareholders. In venture deals usually only paid if declared, and rarely declared. Typical: Non-cumulative, when and if declared.
Founder-friendly
Non-cumulative.
Investor-friendly
Cumulative (e.g. 8% a year).
What to watch for
Red flag
Cumulative dividends that build up each year.
How to model it
This clause doesn't change the maths of your round, but it changes how you run the company. Discuss it with your lawyer and keep it in mind when you compare offers.
Not legal advice. Norms vary by country and market cycle. Have a startup lawyer review your term sheet before you sign.