One particular target of Gurley’s post was a class of controversial legal provisions that are becoming more popular in private fundraising deals. He called them “dirty term sheets.” In such deals, larger investors agree to give companies head-turning valuations and the cash they need in exchange for preferential treatment, such as more shares if a company’s valuation drops or the ability to get their money back first after a sale. The provisions often harm other shareholders and deter future investors from buying in. “Taking a terms-laden deal is like starting the clock on a time bomb. Your only option is to hit the IPO window as fast as possible,” Gurley wrote. “Otherwise, the terms will eat you alive.”

http://www.bloomberg.com/news/articles/2016-04-21/vc-gurley-tells-startups-to-beware-of-dirty-fundraising-terms