You've made it through initial investor conversations, met investors who align with your business goals, and have started to receive term sheets.
There are many resources publicly available that walk through the terminology you may see in a term sheet and I've included links to these at the end of the article. This post won't walk through these basics since those are well covered elsewhere.
Founders I've seen navigate the term sheet stage of the investment process most effectively have a clear notion of what they are optimizing for and don't sweat the small stuff or heavily negotiate areas that won't move the needle in the long term.
There are two big 'needle movers' that make up the largest areas of focus:
Value. This includes both the headline valuation of a round and value that a new investor brings to the company in the form of advice, introductions, and support. Decide what you care about here first: is it a person, network, background which will round out your set of advisors, maximum valuation? There are trade offs to each and benefit in considering alignment from an economic perspective to set the relationship up for success. Valuations should be fair and consistent with market comparables for similar companies and set founding team up for appropriate growth goals. Similarly, the value that an investor brings to a company should position the company well to accelerate growth.
Decision Making. In a growth equity deal an investor may take either a minority or majority stake in a company, where the prior shareholders either give up most of their stake in the company or continue to hold. Board composition will follow suit with deal structure and be the key determinant of who is approving core decisions in a company. As a founder, having a clear view on the best suited set up for you prior to a negotiation will prevent slowdown in a deal on these points.
In deals I've worked on the ultimate ‘win’ is always solidifying a partnership with a great team.
While a term sheet negotiation will always have trade offs, identifying the core "must haves" on value and decision making will clearly separate the areas that will set a company up for a successful partnership.
Resources
NVCA Standard Documents and Benchmarks
Y Combinator Standard Term Sheet