Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

ISBN-13: 9781119594826 / Angielski / Twarda / 2019 / 368 str.

Brad Feld; Jason Mendelson

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Foreword by Fred Wilson (3rd Edition) xiForeword by James Park (3rd Edition) xiiiForeword by Dick Costolo (1st and 2nd Editions) xvPreface xviiAcknowledgments xxiiiIntroduction: The Art of the Term Sheet 1Chapter 1 The Players 3The Entrepreneur 3The Venture Capitalist 4Financing Round Nomenclature 7Types of Venture Capital Firms 9The Angel Investor 10The Syndicate 12The Lawyer 13The Accountant 14The Banker 15The Mentor 15Chapter 2 Preparing for Fundraising 17Choosing the Right Lawyer 17Proactive versus Reactive 18Intellectual Property 20Chapter 3 How to Raise Money 23"Do. Or Do Not. There is No Try." 23Determine How Much You are Raising 24Fundraising Materials 26Due Diligence Materials 32Finding the Right VC 33Finding a Lead VC 34How VCs Decide to Invest 35Using Multiple VCs to Create Competition 38Closing the Deal 39Chapter 4 Overview of the Term Sheet 41The Key Concepts: Economics and Control 42Chapter 5 Economic Terms of the Term Sheet 45Valuation and Price 45Employee Option Pool 47Warrants 50How Valuation is Determined 52Liquidation Preference 54Pay-to-Play 63Vesting 66Exercise Period 70Antidilution 71Chapter 6 Control Terms of the Term Sheet 77Board of Directors 77Protective Provisions 81Drag-Along Agreement 85Conversion 88Chapter 7 Other Terms of the Term Sheet 91Dividends 91Redemption Rights 93Conditions Precedent to Financing 95Information Rights 97Registration Rights 98Right of First Refusal 100Voting Rights 102Restriction on Sales 102Proprietary Information and Inventions Agreement 103Co-Sale Agreement 104Founders' Activities 105Initial Public Offering Shares Purchase 106No-Shop Agreement 107Indemnification 110Assignment 110Chapter 8 Convertible Debt 113Arguments for and Against Convertible Debt 114The Discount 116Valuation Caps 117Interest Rate 119Conversion Mechanics 119Conversion in a Sale of the Company 121Warrants 122Other Terms 125Early Stage versus Late Stage Dynamics 125Can Convertible Debt Be Dangerous? 126An Alternative to Convertible Debt 127Chapter 9 The Capitalization Table 129Price per Share with Convertible Notes 131Pre-Money Method 132Percentage-Ownership Method 133Dollars-Invested Method 133Chapter 10 Crowdfunding 137Product Crowdfunding 137Equity Crowdfunding 139How Equity Crowdfunding Differs 141Token Crowdfunding 143Chapter 11 Venture Debt 145The Role of Debt versus Equity 145The Players 147How Lenders Think about Loan Types 148Economic Terms 151Amortization Terms 154Control Terms 157Negotiation Tactics 161Restructuring the Deal 163Chapter 12 How Venture Capital Funds Work 167Overview of a Typical Structure 168How Firms Raise Money 169How Venture Capitalists Make Money 171How Time Impacts Fund Activity 175Reserves 177Cash Flow 179Cross-Fund Investing 179Departing Partners 181Corporate Venture Capital 181Strategic Investors 183Fiduciary Duties 184Implications for the Entrepreneur 185Chapter 13 Negotiation Tactics 187What Really Matters? 187Preparing for the Negotiation 188A Brief Introduction to Game Theory 191Negotiating in the Game of Financings 193Negotiating Other Games 194Negotiating Styles and Approaches 195Collaborative Negotiation versus Walk-Away Threats 199Building Leverage and Getting to Yes 200Things Not to Do 203Great Lawyers versus Bad Lawyers versus No Lawyers 205Can You Make a Bad Deal Better? 206Chapter 14 Raising Money the Right Way 209Don't Be a Machine 209Don't Ask for a Nondisclosure Agreement 210Don't Email Carpet-Bomb VCs 210No Often Means No 211Don't Ask for a Referral If You Get a No 211Don't Be a Solo Founder 212Don't Overemphasize Patents 213Don't Be Silent If You Witness Bad Behavior 213Chapter 15 Issues at Different Financing Stages 215Seed Deals 215Early Stage 216Mid and Late Stages 217Chapter 16 Letters of Intent: The Other Term Sheet 221Structure of a Deal 222Asset Deal versus Stock Deal 225Form of Consideration 227Assumption of Stock Options 228Representations, Warranties, and Indemnification 232Escrow 233Confidentiality/Nondisclosure Agreement 235Employee Matters 236Conditions to Close 237The No-Shop Clause 238Fees, Fees, and More Fees 239Registration Rights 240Shareholder Representatives 241Chapter 17 How to Engage an Investment Banker 243Why Hire an Investment Banker? 243How to Choose an M&A Adviser 245Negotiating the Engagement Letter 247Helping Your Banker Maximize the Outcome 251Chapter 18 Why Do Term Sheets Even Exist? 253Constraining Behavior and the Alignment of Incentives 254Transaction Costs 255Agency Costs and Information Asymmetry 256Reputation Constraints 257Chapter 19 Legal Things Every Entrepreneur Should Know 259Intellectual Property 259Patents 261Trademarks 262Employment Issues 263Type of Corporate Structure 264Accredited Investors 265Section 409A Valuations 266(83)b Elections 267Founders' Stock 268Consultants versus Employees 269Compensating Service Providers 270Authors' Note 273Appendix A: Sample Term Sheet 275Appendix B: Foundry Group Term Sheet 285Appendix C: Sample Letter of Intent 295Appendix D: Additional Resources 303Glossary 307About the Authors 321Index 323Excerpt from Startup Communities 333

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BRAD FELD has been an early stage investor and entrepreneur for over thirty years. Prior to cofounding Foundry Group, he cofounded Mobius Venture Capital and Intensity Ventures. He is also a cofounder of Techstars.JASON MENDELSON has over twenty years experience in the venture capital and technology industries in a multitude of investing, legal, and operational roles. Prior to cofounding Foundry Group, Jason was a Managing Director and General Counsel for Mobius Venture Capital. He is also a cofounder of SRS/Acquiom.