The Earnest Money VCs Are Asking For Before Series A

Episode notes

Lucas and Luna examine a quiet but growing trend in early-stage venture capital: VCs asking founders for 'earnest money'—a small cash deposit paid by the startup at signing to secure a term sheet, typically refundable only if the investor walks. Lucas traces the practice to a handful of high-demand rounds in early 2026, citing data from a leaked side letter at a Bay Area AI startup. Luna challenges whether this signals a power shift toward investors or just a negotiating gimmick that weakens founder leverage. The hosts also discuss how deposit structures vary—some linked to legal fees, others tied to exclusivity clauses—and what markers founders should watch for. The episode draws on recent market moves: the ARK Genomic Revolution ETF up 10% in five days, suggesting speculative froth that may embolden VCs to demand concessions. Lucas closes with a forward-looking note on whether earnest money could become standard in overheated subsectors like biotech and enterprise AI.