No-Shop Clauses: How Long is Too Long?

You've signed a term sheet. Now what? Usually, it means you're locked into exclusive negotiations with that investor for a period of time. This is the no-shop clause—and the length matters more than you might think.

What Is a No-Shop Clause?

A no-shop (or "exclusivity") clause prohibits you from soliciting or accepting offers from other investors for a specified period after signing the term sheet. It gives the investor time to complete due diligence and finalize documents without worrying about being outbid.

This is standard. Investors need time to do their work, and they don't want to invest that time if you're simultaneously talking to competitors.

What's Standard

• Seed/SAFE: Often no exclusivity, or 2-3 weeks
• Series A: 30-45 days
• Series B+: 45-60 days

The more complex the deal and the larger the check, the more time is reasonable. A $20M Series B with extensive due diligence needs more time than a $500K SAFE.

What's Aggressive

• 60+ days at seed: No seed deal should take this long
• 90+ days at any stage: This is excessive and creates leverage problems
• No clear end date: Exclusivity should have a hard stop
• No termination rights: You should be able to terminate if the investor misses milestones

Why Long No-Shops Are Dangerous

1. Loss of leverage. Other investors move on. Your FOMO-based term sheet becomes your only option.

2. Business risk. Two months of not being able to raise money is a long time for a startup.

3. Investor behavior. A long no-shop with no milestones lets investors drag their feet during diligence.

What to Negotiate

1. Shorter duration. Push for 30-45 days. If they need 60+, ask why.

2. Termination triggers. Include provisions that let you terminate exclusivity if:

• The investor hasn't delivered closing documents by a certain date
• Due diligence isn't proceeding in good faith
• Financing isn't complete by the exclusivity end date

3. Activity requirements. Require the investor to provide a diligence checklist upfront and commit to a closing timeline.

4. Automatic extension limits. If the agreement allows extensions, cap them (e.g., "may be extended by mutual agreement for up to 15 additional days").

The Bottom Line

No-shop clauses are standard, but length matters:

• 30-45 days is reasonable for most deals
• 60+ days needs justification (complex deal, regulatory issues, etc.)
• Always include termination triggers to protect yourself from investor foot-dragging

A term sheet with a 90-day no-shop is not a term sheet—it's a hostage situation.