Earlier quoted context omitted.
I don't understand the "leave the code with them" part
I think they mean by open sourcing, they can take the code to a new startup without having IP legality issues.
If a company goes under, the investors will want to sell off the IP, open sourcing everything would make that IP less valueable. There must be some blanket clause in the term sheet to cover that, right? Ie: founders won’t do anything which will materially hurt the company without board approval (or something, I am no where close to a lawyer, this is all conjecture)