No-Shop Clauses: A Founder Miss

The no-shop clause is almost always legally binding — unlike most of the term sheet around it. Yet founders routinely sign it without reading it carefully.

Definition: A no-shop (exclusivity) clause legally prevents your startup and founders from soliciting, negotiating, or entertaining alternative financing from other investors for a specified period. Once signed, you cannot use this term sheet as leverage to generate competing offers.

What Founders Get Wrong

• Signing without reading the duration: A 90-day exclusivity period for an early-stage deal is too long. 30–45 days is standard.
• Not negotiating fall-away clauses: If the investor fails to produce draft definitive documents within an agreed timeframe, the exclusivity should automatically expire. Without this, you can be locked out of the market while the investor drags their feet.
• Assuming it's non-binding: The no-shop clause is binding from the moment you sign, regardless of what the cover page says.

Key Negotiation Points

• Duration: 30–45 days for early-stage rounds. 60 days maximum. Avoid 90+ day exclusivity.
• Fall-away clause: If the investor fails to provide draft agreements by a specific date, or introduces material changes to agreed terms, the exclusivity terminates automatically.
• Scope carve-outs: You should be able to continue with existing investors, respond to unsolicited inbound interest (without negotiating), and fill the round with smaller cheque investors.
• Consequences of breach: If a break-up fee is included, cap it at 3–4% of the transaction value.

Evolv's Recommendations

• Never sign a no-shop clause without a fall-away provision.
• Negotiate the duration down — 30–45 days is reasonable.
• Understand the scope — what you can and cannot do during exclusivity.
• If you receive an unsolicited approach during exclusivity, inform your current investor transparently.

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