A no-shop clause prevents the company from talking to other investors or acquirers for a defined period (usually 30 to 60 days) after signing a term sheet. It gives the lead investor exclusivity to complete diligence and negotiate definitive documents without competitive pressure.
No-shops are one of the few binding parts of a term sheet. Breaking one can result in damages and reputational harm. Founders should negotiate the duration, the carve-outs, and the consequences carefully before signing.