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Playing Minesweeper With Term Sheets
1. (aka “How to read the fine print when you raise venture money”)
Vishy Venugopalan
@midtownninja; http://midtownninja.com
vishy.v@gmail.com
2. Get an idea
1.
Get a team
2.
Angel Funding
??? Hiring
3. Venture Capital
Product dev & sales
Profit
4.
3. A non-binding expression of firm interest
A negotiable document
Gets hairy and technical very quickly
Let’s navigate this minefield together!
4. Pre-money vs post-money
For early stage startups, this is hard
BUT, important to get it right
Single takeaway from this talk
GET YOUR VALUATION RIGHT
5. The unit of ownership is a share
Classes of shares: preferred vs common
At exit: participating preferred
Multiple preferences
6. New stock options are created for future hires
Lowers effective pre-money valuation
Example
7. Up round vs down round
Down round: investors expect to be made
whole
Full-ratchet vs weighted average
8. Why do you need a VC?
Money
Expertise, Network
Customers vs investors as sources of money
Build a stable business or move to next thing?
Remember: you can’t divorce your VC
9. Google “Fenwick & West term sheet survey”
Venture Hacks: http://venturehacks.com/
Ask the VC: http://www.askthevc.com/blog
