Negotiating the Deal

07/28/2016 00:02:51 to watch
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Just as a venture capital firm is doing due diligence on you, don’t be afraid to do some due diligence on them. Check to make sure they’re the right fit, and try to make sure they’re a team that hangs in there—through the highs and the lows.

Suggested Readings

Founders School || Financing Your Venture: Venture Capital || Negotiating the Deal || Impact Guide (PDF).

Bussgang, Jeffrey. 2010. Mastering the VC Game: A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Own Terms. New York: Penguin Group. Chapter 4 “When the Dog Catches the Bus: Making the Pick and Doing the Deal”.

Mark Suster. “Time is the Enemy of All Deals.” Both Sides of the Table. Blog Post. Feb 25 2010.

Deepak Malhotra. “How to Negotiate with VCs.” Harvard Business Review. Article. May 2013.

Questions for You

Do the VC firms I’m interested in stick by their entrepreneurs through the highs and lows?

What entrepreneurs or industry specialists can I talk to to get a well-rounded perspective of the VC firms I’m interested in?

What is the VC firm’s long-term view of my management and leadership teams? Does it align with my vision?

What is my preferred exit option?

In the term sheet, who is maintaining control (taking on investment capital, composition of the board, who gets to fire the CEO)?

In the term sheet, how do the economics play out (pre-money valuation, option pool, etc)?

Tools and Exercises

Researching a VC Firm: Talk to entrepreneurs the firm has worked with (successful and unsuccessful ones) to see how the firm behaves in the good times and the bad. Find out what kind of end goal they usually try to attain in terms of company exit, leadership team, etc.

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