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explain-equity-terms

Explains startup equity terms, term sheet clauses, and fund structures in plain English.

3.4k|487|Updated Jul 25, 2025
Search Tags:#equity#startup fundraising#SAFE#term sheet#liquidation preference#stock options#Venture capital
One-click install
npx skills add https://github.com/davepoon/buildwithclaude --skill explain-equity-terms
Or copy as Structured Prompt for Agent▼
Please help me install this Agent Skill.
Skill: explain-equity-terms
Source: https://github.com/davepoon/buildwithclaude/tree/main/plugins/venture-capital-intelligence/skills/explain-equity-terms
Command: npx skills add https://github.com/davepoon/buildwithclaude --skill explain-equity-terms

SYSTEM DOCUMENTATION & REQUIREMENTS

What problem does it solve?

Founders and investors often struggle to understand dense legal language in SAFEs, term sheets, convertible notes, and equity agreements, risking unfavorable terms or missed red flags during fundraising negotiations.

Core Features & Use Cases

  • Equity Term Explanations: Breaks down concepts like valuation caps, liquidation preferences, anti-dilution, pro-rata rights, and drag-along clauses from both investor and founder perspectives.
  • Legal Text Interpretation: Analyzes pasted clauses from term sheets, SAFEs, or subscription agreements and explains what they mean in practice.
  • Negotiation Guidance: Flags aggressive or non-standard terms (e.g., full ratchet anti-dilution, participating liquidation preferences) and identifies what to push back on.
  • Use Case: A founder receives a Series A term sheet with a 2x participating liquidation preference and asks what it means; the skill explains the mechanics, shows why it is aggressive, and suggests negotiating to 1x non-participating.

Quick Start

Ask the assistant to explain a specific equity term or paste a clause from your term sheet and ask what it means for you as a founder.

Frequently Asked Questions about explain-equity-terms

High-intent search queries and answers about installing and using this skill.

FAQPage Schema
What is a SAFE and how does it convert to equity?▼

A SAFE (Simple Agreement for Future Equity) is not debt and has no maturity date or interest. It converts to equity at the next priced round using a valuation cap or discount rate, whichever gives the investor a better price.

What is the difference between a SAFE and a convertible note?▼

A convertible note is debt with an interest rate (typically 4-8%) and a maturity date (18-24 months), creating a repayment obligation if it does not convert. A SAFE has no maturity date and can wait indefinitely for the next priced round.

What is a liquidation preference in a term sheet?▼

A liquidation preference determines investor payout order in an acquisition. A 1x non-participating preference is standard and founder-friendly, while participating or multiple (2x, 3x) preferences are aggressive and costly for founders at mid-range exits.

What is an 83(b) election and when should I file it?▼

An 83(b) election is an IRS filing to pay taxes on restricted stock at grant rather than at vesting. It must be filed within 30 days of the grant and can save substantial taxes for early employees if the company grows.

Can this skill replace a startup attorney for term sheet review?▼

No. The skill provides educational explanations of common equity terms and flags negotiation points, but it explicitly states it is not legal advice. You should have any legal documents reviewed by a qualified startup attorney before signing.

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