Term Sheets: What do I need to know about No Shop and Confidentiality?
This week’s question: What do I need to know about no-shop and confidentiality terms?
Our answer: No-shop (aka. exclusivity) and confidentiality provisions are short and often overlooked terms that only apply to the term sheet, but they carry outsized importance because they’re usually the only binding obligations in it. A no-shop provision restricts you from soliciting or entertaining offers from other potential investors for a set period of time after signing the term sheet. A confidentiality provision obligates you not to disclose the terms of the deal and often even the existence of negotiations to third parties. Don’t dismiss these provisions as boilerplate because they carry major potential consequences for your fundraising process.
Key Considerations
No-Shop Duration. The no-shop’s duration is usually 30 to 60 days, but try to keep the period as short as possible because during that period you can’t pursue other financing options, slowing momentum if your current deal falls apart. Try to keep the period as short as possible and confirm whether it automatically extends if the parties are still negotiating.
Passive vs. Active Solicitation. Push for flexibility to allow inbound solicitations because some no-shop provisions block you from talking to even those investors who approach you. This stricter version can leave you stuck if the lead investor drags their feet or a much better offer comes in.
Confidentiality Scope. Make sure the confidentiality scope is broad enough that you can still speak with a broad range of key stakeholders (eg. other key investors, strategic partners, advisors) as needed to close the round, not just your startup’s board, officers, and attorneys.
Survival of No-Shop and Confidentiality. It’s standard for the no-shop to automatically end if the deal doesn’t close. Confidentiality provisions, however, sometimes survive indefinitely; while this may be acceptable for certain details (eg. sensitive data or valuations), be mindful that it doesn’t apply to other information you may want to share with future investors.
When to Sign. You should only sign a term sheet with no-shop and confidentiality terms when you’re reasonably confident of your and the other party’s commitment to the deal. Signing too early and then having second thoughts can leave you boxed in and stall your fundraising.
Why It Matters.
No-shop and confidentiality terms are often treated as afterthoughts in negotiations, but they can materially shape your fundraising path. A lengthy or restrictive no-shop can tie your hands just when momentum matters most, leaving you exposed if a deal falls apart. Overly broad or indefinite confidentiality obligations can limit your ability to engage with future investors or share basic fundraising details. Because these provisions are usually the only binding terms in a term sheet, you should approach them with the same care you would give to valuation or liquidation preference. Negotiating duration, scope, and survival thoughtfully can help preserve flexibility, protect your fundraising options, and keep investor relationships on solid footing.
