Why We Said No to a Term Sheet From a Fund Everyone Wanted
The valuation was generous. The board seat and the timeline were the problem.
In late 2023 we received a term sheet for our Series A from a fund that most founders in Amsterdam would have framed and hung on the wall. The valuation was about 30 percent higher than we had hoped for. The partner was smart and kind. My co-founder and I spent a weekend walking along the canals in Utrecht arguing about it, and on Monday we said no.
Nine months later we raised from a smaller fund at a lower valuation. I do not regret it, but I want to be honest about how close we came to saying yes, and why the decision was harder than it sounds.
What was in the document
The headline terms were excellent: €6 million at a pre-money valuation we had not dared to ask for. The problems were in the details, and they only became clear after our lawyer walked us through them line by line over two long evenings.
- The fund wanted two board seats out of five, plus an observer.
- There was a clear expectation, said out loud in meetings, that we would expand into Germany and the UK within eighteen months.
- The growth plan implied tripling the team in a year.
None of these were unusual. But together they described a company that would look very different from the one we were building.
The question that changed our minds
One evening we asked ourselves a simple question: if we take this money, what will we be doing every day in a year? We wrote the answer on a sheet of paper. It was mostly hiring, managing managers, opening an office in Berlin, and preparing board decks.
Then we wrote what our customers actually needed from us in that year. Our warehouse software still had serious gaps for mid-sized distributors. Our best customers wanted deeper integrations, not a German sales team. The two lists barely overlapped.
The cost of saying no
It was not free. We spent six more months running the company on tight margins. I took a salary cut. We delayed two hires that would have helped. There were nights when I thought we had made a stupid, proud mistake.
We also lost some reputation. In a small ecosystem, people notice when you turn down a famous fund, and a few investors assumed something was wrong with us. One partner at another firm asked me, half joking, whether we had failed due diligence.
What we got instead
The fund we eventually chose invested €3.5 million. They took one board seat. In our first meeting, the partner asked us what we thought the right growth rate was, rather than telling us. We doubled the team instead of tripling it, focused on the Dutch and Belgian market for another year, and built the integrations our customers had been asking for.
Our revenue grew 140 percent that year, which was less than the original plan demanded and more than enough to keep us healthy. More importantly, we still liked going to work.
I have no idea what would have happened on the other path. Maybe it would have been bigger and faster. But I learned that a term sheet is not a prize. It is a description of the next five years of your life, and you should read it that way.
