One clause that's gone uncommented: Transfer Restrictions: Bylaws and option plan documents shall include limitations on certain transfers, includi

One clause that's gone uncommented: Transfer Restrictions: Bylaws and option plan documents shall include limitations on certain transfers, including on secondary markets, to competitors, or that may trigger public reporting obligations. In order for investors, founders, and employees to cash out on their stock holdings, companies need to have an exit. An exit can be an acquisition by an already-public company, or an IPO (taking the company public). In the first Dot Com bubble, companies would IPO before reaching profitability and sometimes even before reaching significant revenue. For a number of reasons (scrutiny from Wall Street, public reporting obligations, Sarbanes-Oxley), companies that intend to go public increasingly choose to delay their IPOs. In 2004, Google went public with 2003 revenues of $960m and profits of $105m. In 2012, Facebook went public with 2011 revenues of $3700m and profits of $1000m. One way shareholders managed their longer time-until-IPO horizons is by selling their stock on the secondary market. Many startups (SecondMarket, SharesPost, etc) were set up to help shareholders of successful companies like Facebook and Twitter sell their private company stock to qualified investors. The transfer restriction quoted above means shareholders can't transfer (sell) their stock until IPO or unless they have the consent of the board. Investors tend to have long-term horizons and may not care about getting locked up in an investment until IPO. In any case, investors are well represented on boards. Founders have leverage with the board and can negotiate partial cash-outs (selling some of their common stock to investors), but in any case own their shares outright and can hold on to them until IPO. Employees with incentive stock options, however, can get screwed. Options are not stock and (even after having vested!) will expire if the employee quits or gets fired. If the company is doing well, the Fair Market Value (FMV) of the stock may be much higher than the employee's exercise price, which means exercising the options will incur a large Alternative Minimum Tax (AMT) penalty. This means an employee might have very valuable, vested stock options but no way to keep them upon leaving the company because exercising can put them in a tricky cash flow situation where the IRS expects them to pay taxes on unrealized (and unrealizable, because of transfer restrictions) capital gains. This term sheet is generally founder-friendly, but the transfer restriction is certainly not employee-friendly.