Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist / Edition 2 by Brad Feld, Jason Mendelson | | 9780470929827 | Hardcover | Barnes & Noble
Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist / Edition 1
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Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist / Edition 1

4.0 3
by Brad Feld, Jason Mendelson
     
 

ISBN-10: 0470929820

ISBN-13: 9780470929827

Pub. Date: 08/02/2011

Publisher: Wiley

Praise for Venture Deals

"My biggest nightmare is taking advantage of an entrepreneur without even realizing it. It happens because VCs are experts in financings and most entrepreneurs are not. Brad and Jason are out to fix that problem with Venture Deals. This book is long overdue and badly needed."
Fred Wilson, Managing Partner,

Overview

Praise for Venture Deals

"My biggest nightmare is taking advantage of an entrepreneur without even realizing it. It happens because VCs are experts in financings and most entrepreneurs are not. Brad and Jason are out to fix that problem with Venture Deals. This book is long overdue and badly needed."
Fred Wilson, Managing Partner, Union Square Ventures

"Feld and Mendelson pack a graduate-level course into this energetic and accessible book. The authors' frank style and incisive insight make this a must-read for high-growth company entrepreneurs, early-stage investors, and graduate students. Start here if you want to understand venture capital deal structure and strategies. I enthusiastically recommend."
Brad Bernthal, CU Boulder, Associate Clinical Professor ofLaw, Technology Policy, Entrepreneurial Law

"A must-read book for entrepreneurs. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. That's a good thing not just for entrepreneurs, but also for venture capitalists, angels, and lawyers. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster."
Greg Gottesman, Managing Director, Madrona Venture Group

"Venture Deals is a must-read for any entrepreneur contemplating or currently leading a venture-backed company. Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood. It's like having a venture capitalist as a best friend who is looking out for your best interests and happy to answer all of your questions."
Emily Mendell, Vice President of Communications,National Venture Capital Association

"The adventure of starting and growing a company can be exhilarating or excruciating—or both. Feld and Mendelson have done a masterful job of shedding light on what can either become one of the most helpful or dreadful experiences for entrepreneurs—accepting venture capital into their firm. This book takes the lid off the black box and helps entrepreneurs understand the economics and control provisions of working with a venture partner."
Lesa Mitchell, Vice President, Advancing Innovation, Kauffman Foundation

Product Details

ISBN-13:
9780470929827
Publisher:
Wiley
Publication date:
08/02/2011
Series:
Wiley Desktop Editions Series
Pages:
240
Sales rank:
299,911
Product dimensions:
6.20(w) x 9.10(h) x 1.00(d)

Table of Contents

Foreword xi

Preface xiii

Acknowledgments xix

Introduction: The Art of the Term Sheet 1

1 The Players 5

The Entrepreneur 5

The Venture Capitalist 6

The Angel Investor 8

The Syndicate 10

The Lawyer 11

The Mentor 13

2 How to Raise Money 15

Do or Do Not; There Is No Try 15

Determine How Much You Are Raising 16

Fund-Raising Materials 17

Due Diligence Materials 23

Finding the Right VC 23

Finding a Lead VC 25

How VCs Decide to Invest 26

Closing the Deal 28

3 Overview of the Term Sheet 31

The Key Concepts: Economics and Control 32

4 Economic Terms of the Term Sheet 35

Price 35

Liquidation Preference 41

Pay-to-Play 47

Vesting 50

Employee Pool 54

Antidilution 55

5 Control Terms of the Term Sheet 61

Board of Directors 61

Protective Provisions 63

Drag-Along Agreement 68

Conversion 70

6 Other Terms of the Term Sheet 73

Dividends 73

Redemption Rights 75

Conditions Precedent to Financing 77

Information Rights 79

Registration Rights 80

Right of First Refusal 83

Voting Rights 84

Restriction on Sales 85

Proprietary Information and Inventions Agreement 86

Co-Sale Agreement 87

Founders’ Activities 88

Initial Public Offering Shares Purchase 89

No-Shop Agreement 90

Indemnification 93

Assignment 93

7 The Capitalization Table 95

8 How Venture Capital Funds Work 99

Overview of a Typical Structure 99

How Firms Raise Money 101

How Venture Capitalists Make Money 102

How Time Impacts Fund Activity 106

Reserves 108

Cash Flow 110

Cross-Fund Investing 111

Departing Partners 111

Fiduciary Duties 112

Implications for the Entrepreneur 112

9 Negotiation Tactics 113

What Really Matters? 113

Preparing for the Negotiation 114

A Brief Introduction to Game Theory 116

Negotiating in the Game of Financings 118

Negotiating Styles and Approaches 120

Collaborative Negotiation versus Walk-Away Threats 123

Building Leverage and Getting to Yes 124

Things Not to Do 126

Great Lawyers versus Bad Lawyers versus No Lawyers 129

Can You Make a Bad Deal Better? 129

10 Raising Money the Right Way 133

Don’t Ask for a Nondisclosure Agreement 133

Don’t Email Carpet Bomb VCs 134

No Often Means No 134

Don’t Ask for a Referral If You Get a No 134

Don’t Be a Solo Founder 135

Don’t Overemphasize Patents 136

11 Issues at Different Financing Stages 137

Seed Deals 137

Early Stage 138

Mid and Late Stages 138

Other Approaches to Early Stage Deals 139

12 Letters of Intent—The Other Term Sheet 145

Structure of a Deal 146

Asset Deal versus Stock Deal 149

Form of Consideration 151

Assumption of Stock Options 152

Representations, Warranties, and Indemnification 155

Escrow 157

Confidentiality/Nondisclosure Agreement 158

Employee Matters 159

Conditions to Close 160

The No-Shop Clause 161

Fees, Fees, and More Fees 162

Registration Rights 163

Shareholder Representatives 164

13 Legal Things Every Entrepreneur Should Know 167

Intellectual Property 167

Employment Issues 169

State of Incorporation 170

Accredited Investors 170

Filing an 83(b) Election 171

Section 409A Valuations 172

Authors’ Note 175

Appendix A: Sample Term Sheet 177

Appendix B: Sample Letter of Intent 197

Glossary 205

About the Authors 213

Index 215

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