No-Shop Clause

TL;DR

A binding term sheet provision preventing the company from soliciting or accepting competing offers for a defined window after signing.

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.

Worked example

A Series B term sheet includes a 45-day no-shop. Within those 45 days, the founder cannot solicit or accept other term sheets, the lead investor uses the time to complete diligence and definitive docs without bidding-war risk.

Common pitfalls

• Signing a no-shop with a duration longer than diligence actually requires.
• Failing to carve out continued discussions with existing investors.
• Underestimating the leverage loss from exclusivity.

When this shows up in a pitch deck

Negotiated alongside the term sheet; not deck content.

See No-Shop Clause in context

No-Shop Clause shows up most often in these scoring rubrics and investor profiles, jump straight to who cares about it and how to pitch them.

For investor types

• Strategic Investor, Partnership Capital

Related terms

• Term Sheet, A non-binding document outlining the principal terms of a proposed financing, used to align investor and founder before legal documents are drafted.
• Letter of Intent, A non-binding document outlining the proposed terms of a customer agreement, partnership, or acquisition before formal contracts are drafted.
• Due Diligence, The investigation an investor performs to verify the claims in the pitch and assess all material risks before signing a term sheet or wiring funds.
• Lead Investor, The investor who sets the terms of a round, takes the largest check, and typically takes a board seat or significant governance role.
• Data Room, A secure shared folder with every document an investor needs for due diligence, financials, contracts, cap table, team info, and customer references.

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