Why it matters
There is a real tension here. Investors want founders fully aligned, no early exits. Founders, especially those who've spent years on below-market salary, occasionally need liquidity for life events — buying a home, paying medical bills, family obligations. A blanket prohibition forces founders to choose between staying broke and asking for an investor consent that's politically expensive. Most top-tier US firms now allow modest secondary at Series B+ as a retention tool. Blanket bans at Series A are a control instrument.
How to negotiate
Allow modest founder secondary by right after a defined holding period (e.g. up to 5% of vested holdings per year after the second anniversary of the round, capped at $X per year). Subject larger secondaries to investor consent. Ensure family transfers, estate-planning vehicles, and charitable donations are explicitly carved out. Build in an automatic right to participate in any company-led tender.
Example language
How this clause typically appears in a term sheet. Read it carefully — predatory language is often buried in routine paragraphs.
No Founder may transfer any shares of Common Stock without the prior written consent of the holders of a majority of the Series Preferred. The foregoing restriction shall apply to all transfers, regardless of size or counterparty.
TURNSHEET provides intelligence, not legal advice. This page describes typical market behaviour and common negotiation tactics; your specific deal may have nuances that change the analysis. Always review your term sheet with qualified legal counsel before signing.