Process & paperwork
No-shop / exclusivity
Also called Exclusivity period, Standstill
A binding commitment by the company not to solicit or negotiate with other investors for a defined period after signing the term sheet.
In plain English
A no-shop takes the company off the market. Having signed a term sheet, the founders agree not to solicit, negotiate with or provide information to other prospective investors for a stated period — usually thirty to sixty days — while the lead completes diligence and the documents are drafted.
The justification is genuine. An investor about to spend real money on legal and diligence costs does not want to fund a process whose only function is to generate a competing bid. Exclusivity is what makes it rational to incur those costs.
The risk sits entirely with the company. Exclusivity is binding while the commercial terms are not, so a company can spend sixty days off the market, watch the investor withdraw, and restart fundraising two months later with less cash and a story to explain. In a tightening market this is not a hypothetical.
The mitigations are length and carve-outs: the shortest workable period, an express right to continue conversations with existing investors, and automatic termination if the investor withdraws or materially changes terms.
What it means for your cheque
You are not usually a party to exclusivity, but it shapes the timetable you are joining. A round under a sixty-day no-shop is a round where the lead has committed and the schedule is fixed, which is useful to know when deciding how quickly you must act.
It also tells you something about how the round was run. A company that granted a ninety-day exclusivity to an investor who then renegotiated terms halfway through has been treated badly, and the terms you are being offered may reflect that weakened position.
Do the arithmetic
A no-shop that goes wrong
A company with five months of runway signs a term sheet with a 60-day exclusivity in month one.
| Runway at signing | 5 months |
|---|---|
| Exclusivity period | 60 days, during which no other investor can be approached |
| Day 45 — diligence raises a concern | the investor proposes a 30% lower valuation |
| Runway remaining | 3.5 months |
| Company's realistic options | accept the revised terms, or restart fundraising with 3.5 months of cash |
| Negotiating position | materially weaker than on day one |
The exclusivity was binding and the valuation was not. That asymmetry is the entire risk of a no-shop, and it is why the length of the period matters more than founders usually think.
At the table
What to negotiate
- Keep the period as short as the diligence genuinely requires — 30 to 45 days is usually enough at seed.
- Carve out continuing conversations with existing investors and with parties already in process.
- Provide for automatic termination if the investor withdraws or proposes materially different terms.
- Avoid automatic extensions; require any extension to be agreed in writing.
- Do not sign an exclusivity that runs past the point where the remaining runway leaves a real alternative.
No-shop / exclusivity: common questions
How long should exclusivity last?
What happens if the investor walks away during exclusivity?
Does exclusivity stop the company talking to existing investors?
Keep reading