A term sheet can look like victory while committing a founder to growth the business has not proved it can reach. Before accepting, model the targets behind the valuation and decide whether the company can pursue them without distorting the product, hiring plan or runway.
At 4:47 on Friday afternoon, Kwame was sitting in a small office in Accra with the term sheet open on his laptop and a takeaway container going cold beside it. He had until Monday to sign. The valuation was higher than he had expected, high enough to make the previous two years of missed weekends feel briefly settled.
Kwame is a composite, but the decision is familiar. His startup sold workflow software to small logistics companies. A handful of customers used it every week. Two paid late. One had asked for a feature that would pull the product towards custom consulting. The pipeline looked promising in the deck and uncertain in his bank account.
The capital would extend the company’s runway. The attached growth expectations assumed that demand would accelerate soon after the money arrived.
By Friday evening, the bad ending was clear. If Kwame accepted and demand remained uneven, he could spend the next year hiring against a forecast, pushing reluctant prospects through discounts and explaining every missed target to investors. If he declined, payroll would keep approaching with no new cushion. Either choice could close the company.
The valuation was pricing in a future he had not tested
I have learned to read a term sheet in two layers. The first contains the terms everyone discusses: valuation, ownership, investor rights and board structure. The second contains the company the founders will feel pressured to build once they accept.
Kwame’s headline valuation implied a pace. To support it, he would need more customers, larger contracts or both. That meant sales capacity before he had a repeatable sales process, engineering hires before he knew which requests belonged in the core product, and expansion conversations before retention had become boring.
The number felt flattering because it described what the company might become. It also created a reference point for every board conversation that followed.
Founders sometimes treat a high valuation as extra room. It can narrow the available choices. A slower experiment now looks like hesitation. A careful quarter looks like underperformance. A useful customer segment may appear too small because the plan already assumes a larger market arriving on schedule.
Kwame had seen the same pressure from another direction when deciding whether to hire ahead of evidence, the tension explored in Should I Run Friday Payroll or Hire an AI Engineer Before Testing Demand?. Capital changes the size of the decision. It does not supply the missing demand.
He replaced the pitch forecast with an operating forecast
On Saturday morning, Kwame returned to the office with a notebook and removed the fundraising deck from the screen. He wrote down what had actually happened during the previous quarter: how prospects found the company, who completed onboarding, which accounts needed repeated help, why one customer nearly left and how long each sale consumed.
Then he built two forecasts.
The first assumed the hoped-for growth appeared. The second assumed sales continued at the current uneven pace while hiring and investor expectations increased. The second forecast was uncomfortable because it showed the company reaching a familiar cliff with a larger team and less freedom to change direction.
That was the turn. The question on his notebook stopped being, “Is this enough money?” It became, “What must become true for this money to help?”
Three assumptions carried most of the plan: customers would buy without founder-led persuasion, new accounts would remain active after onboarding, and the product could serve them without turning every contract into a separate build. None had enough evidence yet.
This did not make the deal bad. It gave Kwame something concrete to discuss before signing.
Monday’s answer depended on the conversation before it
By Sunday afternoon, Kwame had marked the terms he wanted counsel to examine and drafted a short note to the investor. He did not ask for a lower ambition. He asked what would happen if the first two quarters produced learning instead of the growth curve in the deck.
Would the investor support a smaller initial hiring plan? Which milestones mattered most? Was the company expected to enter another market quickly? How would both sides judge progress if the strongest customer segment turned out to be narrower than the original pitch?
These questions test more than financial alignment. They show whether the investor is backing the reasoning process or mainly the forecast.
The recent funding milestone around Moove offers a tempting comparison for African founders watching large rounds from Accra, Lagos or Johannesburg. Yet another company’s raise cannot prove demand inside your own pipeline. The useful question stays local: what evidence does your company have, and what decisions will this capital force before the evidence improves?
The signature followed a smaller promise
On Monday morning, Kwame did not walk into the office with certainty. He had a revised hiring sequence, a list of demand tests and written points for the investor conversation. The term sheet still carried risk, but the risk had a shape.
His first commitment after signing would be smaller than the valuation suggested. He would test whether customers could move from interest to repeated use without his constant intervention. Hiring would follow evidence from that test. Expansion would wait.
At 9:10, the cold takeaway container was gone. The notebook remained open beside his laptop, with one sentence boxed twice: capital should fund the next proof, not replace it.
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