1. 2014 GloSho Bootcamp
Negotiating a Deal
October 2014
This presentation is privileged and confidential

2. 1
DEVELOPING A NEGOTIATING STRATEGY
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Seek “blue ocean” partners
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Working with “grow the pie” vs. “zero sum” partners is the only way to go
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Find as many non-financial levers as possible
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Sharing non-financial elements with investor reduces dilution
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The best partners/investors are people/groups who bring something beyond money
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Negotiating with only one group isn’t negotiating
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Job one is to create optionality for the company
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Talk to as many people as possible
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Give exclusivity as a last resort
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Establish a BATNA
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Understand your personal “walk away price”
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Don’t be afraid to fire “bad investors”
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Business people drive strategy not attorneys
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Attorney are hired for two reasons – to figure-out how to execute business deals and to protect entrepreneurs
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If you let attorneys drive strategy, you will pay too much, waste time, anger investors and end with an over-engineered solution
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

3. 2
WHO SHOULD BE INVOVLED?
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Smaller is better
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Smaller groups are easier to manage when negotiating tough points
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Committees don’t work
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Mentors, mentors, mentors
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Seek advice from trusted mentors who don’t have a financial interest in what you do
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Nothing like having a totally disinterested view on a deal
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Keep current investors in the loop
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If you already have professional investors (i.e., not friends and family), keep them up to speed
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

4. 3
UNDERSTANDING TERM SHEETS
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Ownership, control and recruiting
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Understand what the fully diluted ownership will look like
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Think carefully about how the various classes of stock affect / create control
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Make sure to get enough in the option pool to attract the right talent
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Don’t agree to terms you don’t understand
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Investors are around for a long, long time
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Bad business deals  unhappy people  failed businesses
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Look for hinder inequities
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Strive to ensure those who add the most value get the biggest payout
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Use attorneys to check market standards
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Anti-dilution provisions
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Preferred structure (participation & caps)
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Preferred interest rate
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

5. 4
STRUCTURING A DEAL
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Begin at the end and work backwards
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Have a realistic view of value before you begin structuring
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High Growth vs. High Cashflow
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Technology vs. Development Risk
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IPO / Trade Sale / Recap
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Seek (don’t just talk) for win-win situations
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When incentives are aligned, you don’t need to consider how others will react to tough situations
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Be realistic about your negotiating position
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Market size, technical talent, required capital, personal risk tolerance, channel strength & need for speed
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Don’t take it personally
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Low valuations aren’t always about your ability to execute or your value as an entrepreneur
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If a deal is good, investors want more not less – thus lower prices
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Put something back on the table at the end
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Once you have everything you want/need – give something back
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Banking goodwill for the tough times is always smart
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Carve out a small piece (<5%) for charity – easy to do when things aren’t worth much
CONFIDENTIAL