Pre-Seed Term Sheets for Hard Science: The Investor Carve-Outs

Pre-seed term sheets for deep tech companies contain investor protections that are rarely seen in software term sheets. These include: Milestone-Based Tranches — the investment is disbursed in stages tied to technical milestones (TRL advancement, regulatory approval, first pilot customer) rather than all at closing. IP Assignment Covenants — investors require all founders and key researchers to assign their IP to the company, with specific representations about prior inventions. Key Person Provisions — the investment may be contingent on specific technical founders remaining with the company for a minimum period. Extended Due Diligence Rights — investors in deep tech typically request broader technical due diligence (including review of lab notebooks, patent filings, and regulatory submissions) than software investors. For founders, the advice is: negotiate milestone tranches carefully — make sure the milestones are within your control (achieve TRL 6 with our technology) not outside your control (receive FDA approval, which depends on a regulator’s timeline).