No-Shop Clause
A binding term sheet provision preventing the company from seeking other investors for a set period.
Definition
A no-shop (or exclusivity) clause in a term sheet prevents the company from soliciting or negotiating with other investors for a specified period, typically 30-60 days. This gives the lead investor time to complete due diligence and finalize legal documents without the risk of being outbid. The no-shop is one of the few binding provisions in an otherwise non-binding term sheet.
Why it matters
A no-shop clause means the company is locked into negotiating with one investor. If that investor pulls out, the company has lost time and may face a worse fundraising environment. For employees, this mostly affects the timing and certainty of funding rounds.
Example
A company signs a term sheet with Andreessen Horowitz that includes a 45-day no-shop period. During those 45 days, the CEO cannot talk to Benchmark, Sequoia, or anyone else about the round, even if they offer better terms.