Definition
No-Shop / Exclusivity
A no-shop clause bars a startup from soliciting or negotiating competing offers for a set period after signing a term sheet.
Once a term sheet is signed, investors usually require an exclusivity (no-shop) period during which the company cannot court other investors or acquirers, giving the lead time to complete due diligence and definitive documents without being used as a stalking horse. The period is typically a few weeks.
No-shop is one of the few binding provisions in an otherwise non-binding term sheet, along with confidentiality. Founders negotiate its length carefully, since a long exclusivity can leave them stranded if the deal falls through.
Related terms
- Term SheetA term sheet is the non-binding document that sets out the key terms of a proposed startup investment before definitive agreements are drafted.
- Due Diligence (VC)Due diligence is the investigation an investor conducts into a startup's finances, legal status, technology, team and market before investing.
- Exit (Startup/PE)An exit is the event through which investors realise the value of their stake — typically an IPO, acquisition or secondary sale.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.