Comments on: Term Sheet Hacks: Get a Great Deal

By: Judging the MIT Venture Capital competion, and, Term Sheet Basics | Viking

Judging the MIT Venture Capital competion, and, Term Sheet Basics | Viking — Fri, 18 Feb 2011 00:18:04 +0000

[...] subject is very well covered on the web, especially Brad Feld’s series of blog posts and on Venture Hacks, and most of material is loosely based on theirs – I include it here in case a summarized [...]

By: The Quiet Rise of AngelList

The Quiet Rise of AngelList — Mon, 04 Oct 2010 18:59:48 +0000

[...] raising funding. They called the blog Venture Hacks, and in it they covered topics like how to negotiate a term sheet, terms that can be problematic for entrepreneurs, and the pros and cons of convertible [...]

By: Is Your VC Founder Friendly? « Steve Blank

Is Your VC Founder Friendly? « Steve Blank — Tue, 15 Jun 2010 17:23:27 +0000

[...] Over the years I’ve become a bigger and bigger believer in some sort of accelerated vesting for the founders tied to finding the business model. There have been suggestions of a different class of stock for founders here and good general advice in VentureHacks here. [...]

By: Term Sheet Hacks: Get a Great Deal | Point Nexus Consulting

Term Sheet Hacks: Get a Great Deal | Point Nexus Consulting — Mon, 24 May 2010 19:37:14 +0000

[...] Term Sheet Hacks: Get a Great Deal [...]

By: Make No Little Plans – Defining the Scalable Startup « Steve Blank

Make No Little Plans – Defining the Scalable Startup « Steve Blank — Mon, 04 Jan 2010 14:03:14 +0000

[...] at us in the board meeting were three term-sheets from brand name VC’s and an unexpected buy-out offer from Google. In fact, Google’s offer for [...]

By: Richie "The BootStrapper"

Richie "The BootStrapper" — Fri, 09 Nov 2007 08:55:33 +0000

Best way to get good legal advice: make friends with a sharp lawyer.

Second best way to get good legal advice: refer clients.

By: Nivi

Nivi — Wed, 01 Aug 2007 18:38:27 +0000

A new CEO would get 5-10% of a financed startup.

Since you’re providing access for your new investors, engineering the deal, and generally making the deal possible for your new investors, you should probably receive what a CEO would get in an LBO. I understand that is in the 10-20% range.

Either way, this assumes that you are joining the company and vesting for 3-4 years.

By: Anonymous

Anonymous — Sun, 29 Jul 2007 13:08:19 +0000

I’m looking for any general rules of thumb that may explain what is reasonable when it comes to determining the ownership for the Founder and ownership for the investor. I’ve created one company fully finance by one VC, who in my opinion took advantage and 2 years into the business cheated me out of half the founders shares. Now they have decided to sell the company. I have been approached by other investors to back a bid to buy the company. Gross sales are $60 million per year. EBITDA is $7.0 million. Original investors will more than double their initial investment (maybe even triple) they made 5 years ago. Founders share is 5% (was 10%).
I’m looking for idea of what to ask investors who back the purchase and further growth of the company.
Thanks,
AG

By: Anonymous

Anonymous — Mon, 25 Jun 2007 16:51:55 +0000

Prior to Series A funding ‘the company’ and very likely the board is severally the founders. So, prior to a series A closing and a board with external investors being formed you, Mr. Silicon Valley Lawyer, effectively and materially represent the founders who are the owners of the company. Your argument in this case is nothing but an example of legal sophistry.

Maybe dont have the guts, nor the moral fibre, to do your fudiciary duty and go to bat for founders because you know you’ll be black balled in future by the VC firm concerned for being too founder friendly.

Bottom line, you represent the interests of the guy/s that sign your engagement letter. They count on you to represent them. They are the incumbent shareholders of the company. The company board, which is not a human being, is nothing a representation of an aggregate of those founder shareholder interests other prior to series A funding.

You do not report to the board that is formed after closing but the one that exists before it. The board prior to funding represents the founders. Therefore, you represent the founders. Kapish?

By: Naval

Naval — Wed, 30 May 2007 00:38:21 +0000

Unfortunately this is one of those “it depends” answers. The major factors are time to liquidity, size of the fund, success of the VC, and success of the fund.

1) The faster you get to liquidity, the smaller it needs to be to count as a win. 3x in one year is a win. 3x in 10 years is not.

2) Biggest factor is size of the fund and how much the investment returns relative to that size.

3) The more successful the VC historically, the bigger the win they need (Sequoia may want 50x while no-name VC might be happy with 5x)

4) The more successful this particular fund is so far, the more anxious the VC is to get this fund done, closed, and move on to the next one. Late in a successful fund’s cycle, the VC is looking to liquidate companies and move on to the next and usually larger fund…