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

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.

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?

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…

1. Ask the firm what they consider a win. See how aligned you are. Check this when you do reference calls on your investors.

2. Pare back protective provisions so the investors lose their right to veto a sale if the share price hits a threshold. We’ll cover this in a future hack.

3. You can always re-negotiate with your investors if you have an offer to buy the company.

So….imagine that one has the opportunity to take $5M at a pre-money of $15M, or take $2M at a pre-money of $6M. Arguably, the expectations from the VC firm are significantly different. ie: in the $5M scenario, the VC expects a $200M liquidity event, whereas in the $2M scenario, the VC expects an $80M liquidity event.

From the entrepreneur’s perspective, this is confusing. On one side, for the same dilution, the more cash the better. On the other, if the entrepreneur and VC are mis-aligned in terms of what constitutes a “win” I’ve heard horror stories in which the VC vetoes a sale and then market conditions change. ie: if a buyer comes along with a check for $50M and this is a win for the entrepreneur, but not for the VC, this could be a problem, that could potentially have been mitigated in how much money to raise.

Any thoughts, O’ sherpas of the VC world?

I wouldn’t do it except for a very late stage company being shopped to purely financial or to corporate investors.

On one hand, it makes all the sense in the world that entrepreneurs who need expert help should be able to hire somebody to help them raise money.

On the other hand, there’s already tons of biased but still good advice from VCs on the web on how to raise money. My guess is that most of the placement agents you can hire are going to give you worse advice than you can get from a few blogs. For example, I constantly refer people to David Cowan’s How To NOT Write A Business Plan.

There there is the adverse selection signal you send by going to a boutique firm. e.g. if you are good you don’t need the help, if you are bad you do need the help. (I hate adverse selection arguments but you should be aware of this signal).

I don’t want to say that it isn’t that hard to get intros to VCs but I will: “It isn’t that hard to get intros to VCs.” In general, they’re looking for companies that are already succeeding in huge markets. Nothing succeeds like success and VCs invest in success. They’re not entrepreneurs with a passion. If you’re succeeding, you should be able to get the meetings.

Angels are more relevant if you are early or you are looking more for a passion investor.