Startup Blog: Take a Stand!

Taffy Williams

It may be around deal structure, testing or design of product, new hires, downsizing or firing, how much to spend on a program or some other issue. The deal terms are ones you as the CEO, entrepreneur, or employee know will cause great stress and even the possible demise of the company.

Which books would you recommend to a VC analyst-associate?

Gust

Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies. Venture Deals. The Business of Venture Capital. Raising Venture Capital for the Serious Entrepreneur. Mastering the VC Game. A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms. Term Sheets & Valuations. A Line by Line Look at the Intricacies of Term Sheets & Valuations. Be Smarter Than Your Lawyer and Venture Capitalist.

Exchangeable shares

Angel Blog

Exchangeable share deal structures solve some of the challenges angels have been having over the past five years. Exchangeable shares solve the biggest problem with convertible notes - the unfair discount - while maintaining their simplicity and cost effectiveness

In it

charliecrystle.com

There's a lot on my mind right now--deal structures, building a company, managing expectations, what the future should be, what I really want. I blog less when I'm in it. I'm not sure how to change that, but when I'm in it, I'm less inclined to blog about what's on my mind. But mostly it's just on finding a win, then building more wins on top of that. That is to say--I'm in it

My First Investment

A VC : Venture Capital and Technology

They had negotiated a deal to purchase an editor called BRIEF and a version control package whose name escapes me (might have been VCS?) So I negotiated a deal to invest the funds into the company for a revenue share on the sale of both products plus a warrant to buy stock in SDC. So we were faced with a quandry, take back the products, which we could do by contract, or restructure the deal. That deal taught me a few big lessons.

The global content playbook & how the internet actually works

Start Up Blog

And it’s licensing deal structures born of the late 1970’s cable TV era that create this back door leakage. I’m a big fan of the John Oliver show Last Week Tonight.

Your (Potential) Investor's Business Model

David Lee

Different business models lead to different approaches to valuation, deal structure and diligence process. In each case, the valuation discussion, deal structure and process will all vary accordingly “[O]ne thing I should tell you is that our approach is our approach, and we don’t even claim it’s the right approach.” ” - Jeff Bezos, 9/6/12, on Amazon’s business model. Different investors have different business models.

Keep Term Sheets Simple for Quicker Cash to Spend

Startup Professionals Musings

Remember a term sheet agreement is not a deal until the check clears. It’s true that Angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists.

Walker Twitter Highlights: August 11th – 21st

Scott Edward Walker

prAYlf Quora-Related Quora: What deal structure should be in place for a friend/family investment of < 20k in your startup? I’m using Twitter as a form of micro-blogging to share interesting blog posts, articles and podcasts relating to entrepreneurship and startups, M&A and legal issues. Below are my five most popular tweets (via bit.ly ) for the past 10 days and a couple of Quora-related tweets.

Deal Certainty ?The Fallacy of a New Market

Recent Buzzes - VC Experts, Inc.

In the aftermath of the economic crisis that began in mid-2007, much ink has been spilled on the lessons learned by buyers and sellers regarding the pitfalls of deal certainty and the development of new paradigms for both financial and strategic buyers.

Agile success generates great feelings

Taffy Williams

The deal structures for the financing may follow the same pattern of making you feel ill or bringing a huge smile. Finding partners and getting deals completed can be a huge energy consuming effort. Yes, it is a bit like THIS! Highs and lows are part of being an entrepreneur.

Agile 61

A Primer on Angel Investment ‘Simple Term Sheets’

Startup Professionals Musings

Remember a term sheet agreement is not a deal until the check clears. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists.

Both sides must be fair in a term sheet negotiation.

Berkonomics

Just a few of these terms include vesting, corporate structure, governance principles, financing strategy, valuation and exit strategy. As an example, twenty five years ago, most VCs used common share deal structures. By Basil Peters.

Groupon Tries to Broaden Its Appeal With Self-Serve Deal Tool

Inc Startups

In a move designed to grow the business, Groupon is giving some merchants the power to create their own daily deals. In the hopes of broadening its market, on Monday Groupon is launching its first self-service platform on Grouponworks.com , enabling small businesses to create their own deals.

When Should Startup Founders Discuss Valuation with Seed VCs?

View from Seed

Additionally, setting a structure and price in advance at above-market value can expedite the negotiation process, especially when it’s with multiple parties. And as my partner Rob Go likes to say, “Time kills all deals.”).

Keeping a Seed Financing Round Open

The Startup Lawyer

But in order to properly accomplish this, your startup will have to keep the round “open&# via the deal documents. But remember that while a lot of these deal structures are standard — each individual deal is unique. Startups don’t want to wait until every investor is ready before closing on a seed financing round. First, the roster of investors will not be identified and/or cutting checks on the same day. Second, what startup wants to wait on cash?

Later-stage rounds and “setting the bar too high”

Chris Dixon

But in reality, assuming the standard preferred structure, the last round investors’ payout is as follows : Scenario 1 : Dropbox exits for greater than $4B ==> investors get a positive return (specifically, exit price divided by $4B).

Entrepreneurs experience piling on

Taffy Williams

Developing great business deals when multiple companies want to partner allows for optimization of the deal structure to provide the maximum return. Dealing with the negative events becomes crisis management and survival.

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Not necessarily a bad deal, but if you didn’t have that in your head you’re setting yourself up for a big surprise.

Who Invests In Investors: Homebrew LP Shares VC Performance Goals, Importance of Diversity & What They Look For In New Funds

Hunter Walker

Similarly, a GP might be in the middle of great flow, but we need to have conviction that they can identify the right deals, structure creatively, and negotiate effectively.

LP 74

From demo day to dollars!

StartupCFO

If you can agree on a deal with that person you can use that to get people on board. Secure the $, then optimize the deal : While valuation matters, the most important thing is to get the $ you need to get to the next big value-creating milestone.

The Corrosive Downside of Acquihires

Both Sides of the Table

Many buying companies price these deals on the basis of $1 million per engineer on the team for an early-stage deal. And wants to structure a huge payout for the employees that will remain. And will investors allow a deal to happen in the first place.

Clean Deal Terms

David Lee

He said one thing there that I agree with 100%, among others: I have an allergic reaction to complex deal structures, as they invariably end up with all sorts of unintended consequences. Lately I’ve seen more complex “deal terms” in early stage financings. Namely, the super pro-rata can act as an effective blocking right to some subsequent deals. Sam Altman has a nice post here on a founder-friendly term sheet.

Knowledge Is Power: Convertible Note Financing Terms, Part V

Gust

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. This is the norm for West Coast deals, but it’s often the case in dealing with East Coast investors (more commonly for VC financing rounds rather than angel seed rounds) that the lead investor wants its lawyers to draft the documents.

in search of.the ideal term sheet

Seed Stage Capital

For any large deal, they will convert and be treated like the founders and employees. VCs really need to move to a deal structure that doesn’t burn up so much lawyer time negotiating provisions that are almost never used.

Knowledge Is Power: Convertible Note Financing Terms, Part II

Gust

In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal. A term sheet keeps things relatively straightforward by summarizing the most significant deal terms in outline form, whereas the deal documents themselves (often referred to as definitive agreements ) — even for a relatively simple convertible debt financing — inevitably contain some densely written legalese. These deal terms are simple but significant.

Acquisitions Aren't About the Money

Inc Startups

When PopCap was being sold, we spoke to multiple potential acquirers, and in the end were extremely fortunate to get a great deal from a great partner. ” We'd spend countless hours talking with the other company about growth, numbers, and deal structure.

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Not necessarily a bad deal, but if you didn’t have that in your head you’re setting yourself up for a big surprise.

Notes on the acquisition process

Chris Dixon

Moreover, some public companies insist that you don’t talk to employees until the deal is closed or almost closed. Deal structure: the cap table is an agreement between you and the shareholders that says, in effect: “If we sell the company, this is how we pay out founders, employees, and investors.” Some even go so far as to try to cut side deals with key employees to entice them to abandon the other employees and investors.

SeedRuption

charliecrystle.com

If I'm a hot deal in NY or SOMA, maybe I can raise and close an angel round in a few weeks. So, context matters to deal structure. So maybe the guidance for deal docs should be this: Convertible Debt: for founders who need a rolling close so the cash can come in as it's raised. I hate that title, but it's Saturday night and I'm feeling saucy. Suster posted a rant about convertible debt vs equity. Fred followed up. Everybody's weighing in.

Finding Investors is highly dependent on your ability to network

Taffy Williams

The deal structures will vary significantly dependent on their experience investing in early stage companies. Grow your network far and wide. It will serve you well! Startups always are seeking funding, the task that is a never-ending battle.

Dialing for Dollars

Taffy Williams

Having a business advisorand a great corporate counsel is important to the final deals structure. One local VC indicated they review more than 600 deals per year andinvest in around 6. As statedbefore, your startup will have little or no money for the first severalmonths. The most important activitiesyou can do in this time are to create as much value to make the companyfundable. Chicken or Egg” is the bestanalogy one can provide to the situation you will face.

Bring something to the party when working with others

Taffy Williams

In a different situation, a prospective partner asked a company for a term sheet for a deal. The deal was to take place after a study was completed. Likewise, there was no discussion of the timing of the execution of the deal, scope of the deal, or other such parameters.

Signaling Pricing Expectations Early in Seed Investment Discussions

Genuine VC

As more transparency to seed-round funding transaction details have emerged, especially with the advent of Angelist and accelerator programs (which both educate and even sometimes set terms & structure for graduating companies), I’ve noticed an increasing number of entrepreneurs signal pricing expectations much earlier in the seed fundraising process. Setting a structure and price in advance can also expedite the negotiation process, especially when it’s with multiple parties.

Knowledge Is Power: Convertible Note Financing Terms, Part IV

Gust

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. Having covered just about every path a convertible note can take, we’ll finish up the series by looking at a few miscellaneous term sheet items and revisiting the pros and cons of different deal structures.

Startup Business Development Strategies: 7 Tips For Putting.

Seed Stage Capital

skip to main | skip to sidebar 24 January 2010 Startup Business Development Strategies: 7 Tips For Putting Together Stellar Deals Business development is fun. A few tips for startups doing deals: 1. Introduce competition into every deal. Be operationally ready to do a deal.

Should You Sell Your Business? 7 Things to Consider

Inc Startups

Prior to the process, my business partner and I wrote down the criteria for the deal that we would accept. In the last few weeks of the deal, we were ready to back out because of a change in the deal structure. I went through with the deal, but the timing wasn''t right.

10 things I wish I knew when I sold my businesses

Jeff Hilimire

With my first sale, my partners and I focused all of our attention on the details of the sale (what the valuation would be, how would it be structured, etc) and very little about what would happen with us individually. It’s easy to get caught up in the dollar signs and deal structure and overlook this important step in the process. Selling a business is an interesting ride.

Why Selling Your Company is Like Dancing With the Stars

Inc Startups

While it may look simple, one misstep could easily cost a business owner millions of dollars or scuttle the deal altogether. Like dancing, it may look simple, but you need assistance from a pro to maximize the value of your company, close the deal and end up a winner.

Selling Your Business: An Interview with Louis Crosier

Growthink Blog

While you can listen to the interview yourself here , two of my favorite points were as follows: -1- Your choice of corporate structure (e.g., Fortunately, you can, for the most part, change your corporate structure down the road. What are the main types of deal structures when selling your business, such as selling for all cash or for all stock?