The benchmark most founders never check
A term sheet arrives with a valuation on the first page and a stack of legal terms behind it. Founders tend to haggle over the first and skim the second. The better habit is to know what the market treats as ordinary, so you can tell quickly when something in your document is not.
Cooley, the law firm that tracks the terms of the venture deals it handles, publishes that benchmark every quarter. Its Q2 2026 Venture Financing Report, dated Aug. 17, covers 166 reported venture financings. One caveat up front: it is a sample of one firm's deals, not the whole market. It is still one of the few regular looks at actual terms rather than headline valuations.
What is close to universal
Two protections show up in nearly every deal in the quarter, according to Cooley:
- 1x liquidation preference: 95.8% of deals.
- Nonparticipating preferred stock: 96.4% of deals.
In plain terms, the typical investor gets its money back first (one times what it invested) and then converts to common to share in the upside, rather than taking its money back and also sharing in the proceeds. The Cooley page does not report how often participating preferred or multiples above 1x appear, so this post does not guess at it.
The practical read for a founder: if an offer has a preference above 1x, or participation, you are off the common path. That does not make it a bad offer. A founder with a weak negotiating position may rationally accept it for a higher headline price. But it should be a deliberate trade, and you should model the exit scenarios where it changes who gets paid what.
What is uncommon, and why it still matters
Cooley also tracks provisions that are the exception. For Q2 2026, with the share of deals in the prior quarter's column from the same report in brackets:
- Pay-to-play provisions: 8.4% of deals (7%). These penalize existing investors who do not put in more money in later rounds.
- Redemption provisions: 5.4% (6.4%). These let investors force the company to buy back their shares under set conditions.
- Accruing dividends: 3% (2.3%).
- Recapitalizations: 1.81% (1.75%).
None of these is common. All of them move value or control, and they tend to appear when a company has less leverage. Pay-to-play, redemption and accruing dividends are the ones to read twice. If one shows up in your draft, ask the lead investor directly why it is there and what would cause it to bite. A clause that costs nothing in a good outcome can matter a great deal in a middling one.
Up rounds are still the norm, with a bit more slippage
The same report shows the mix of round types in Q2 2026, with Q1 as restated in that report:
| Round type | Q1 2026 | Q2 2026 |
|---|---|---|
| Up | 86.6% | 83.6% |
| Flat | 2.5% | 4.3% |
| Down | 10.9% | 12.1% |
Up rounds remain the large majority, which is why Cooley's headline stresses that they "remain strong." But flat and down rounds together rose from 13.4% to 16.4% of deals. It is a modest shift, not a trend by itself, but it is the direction a founder with a stalled company should plan for. (A note on the numbers: Cooley's earlier Q1 report gave slightly different Q1 figures, 86%, 2.6% and 11.4%, so the firm appears to restate prior quarters as more deals are counted. When you cite a trend, use numbers from the same report.)
Read the headline carefully
Cooley reports $85.7 billion invested in Q2, more than double Q1 and the highest level in the history of the report, which goes back to 2014. Before reading that as a market-wide surge, look at the next line. In the tech segment, invested capital went from $36.7 billion to $73.9 billion, which Cooley attributes mainly to "one large late-stage tech deal." The deal count barely moved, from 94 to 95 tech deals, while the median tech deal size rose from $18.5 million to $30.5 million.
The valuation data tells a similar story about mix. Median pre-money for Series D and later fell from $2.4 billion to $600 million, the largest decline in the report. Series B went the other way, rising from $152.5 million to $185.2 million, the largest increase. The share of deals with a pre-money valuation above $100 million rose from 41% to 48%.
Medians for small samples in the later stages swing with which companies happened to close that quarter. A $600 million median at Series D and later is not evidence that late-stage companies lost three quarters of their value. Treat the later-stage figures as noisy and weight the B-stage movement and the above-$100 million share more heavily. Even those come from a sample of 166 deals.
How to use this in your own raise
1. Build a one-page terms comparison before you negotiate. List each term sheet's liquidation preference, participation, dividends, redemption, and any pay-to-play beside the Cooley shares above. Anything outside the 95%-plus norms gets a question.
2. Ask what each unusual clause is for. Investors usually add protections for a reason tied to a specific risk. If you can address the risk another way, such as milestones or a smaller round, you may be able to remove the clause instead of paying for it with price.
3. Model a mediocre exit, not just a great one. Standard terms barely matter when the company sells for ten times the last valuation. They matter in a sale below the capital raised. Run that case with the actual preferences in front of you.
4. Use counsel who sees many deals. Market data is only useful if someone can say where your document sits against it. A lawyer who works on venture financings every week can tell you whether a clause is common, aggressive or just badly drafted.
5. Expect diligence to mirror the terms. An investor asking for extra protection is often signaling extra concern. Have your cap table, financials, contracts and IP assignments clean before the term sheet lands, so the concern gets answered with documents rather than with clauses.
What to watch next
Cooley's Q3 report will show whether the slight rise in flat and down rounds continues, and whether pay-to-play and redemption provisions keep creeping up from their low base. Those two are the quickest tells that investors are asking for more protection in return for the same check. If they climb, expect more founders to be offered a trade: a higher headline price with heavier terms attached. The benchmark above is how you will know what you are being asked to give up.
This post is information and commentary, not legal or investment advice. Have counsel review any term sheet before you sign it.