Why milestone-based funding tranches can kill your company — and how to negotiate terms that protect you if you miss a target by 5%.

Fundraising & Equity

Understanding Milestone Tranches in Term Sheets

Collated by Harry Prabandham

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Instead of receiving all committed capital at close, investors release funding in stages tied to specific milestones (e.g., '$10M now, $10M when you hit $10M ARR by Q4')
Tranches give investors downside protection — they commit less capital upfront and release more only if the company performs
The problem: you hire and spend based on the full commitment, but only receive partial funding — creating existential risk if you miss a milestone
Milestone tranches are increasingly common in uncertain markets where investors want to de-risk their commitments

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About the author

Founder & CEO

Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.