Venture Capital’s Post

A useful guide to prepare for a VC term sheet

Fresh founders, if you're raising #venture #capital to fuel the #growth of your #business, here's a superb guide on how to prepare your #VC term sheet. 🧑🏫

Preparing a venture capital term sheet is a crucial step in the process of raising funds from venture capitalists. This is a good document from Venture Capital #Venturecapital #Termsheet

Chart of the Day: Where Are the Hard Negotiating Lines for Venture Capitalists? If you are negotiating venture capital deals for yourself or your clients, you need to read this piece and save this chart. No, it's not clickbait. I'll leave that for Meghan and Harry bloggers. (Seriously, why do people care so much about the guy who USED to be 6th in line for the British throne?) Roughly 1-2% of venture capital deals reach the term sheet stage. If you manage to secure a term sheet from a VC, don't screw it up. How do you screw it up? By negotiating the wrong things. By dying on the hill that you were never, ever going to take, looking like an idiot, and torpedoing your fundraise in the last mile. This chart from OpenVC, "15 research papers every VC should know," is a really nice cheat sheet. The researchers for "How do venture capitalists make decisions?" (Journal of Financial Economics) surveyed 886 venture capitalists to characterize their degree of flexibility on deal terms. We can glean from this that pro-rata rights, liquidation preferences, and anti-dilution protection are more important than valuation. Ownership stake is even less of a priority, which should tell us that valuation is even more negotiable. I have said and written this before, but it bears repeating, "You can name any valuation you want as long as I get to name the terms." It's not my original idea, but it's a critical one. The way to use this information in practice is to focus on trading the pro rata rights, liquidation prefs, and anti-dilution (and possible board control and vesting) features for valuation because you now know that, on average, those are the "must-have" terms for VCs. You won't win those battles - so rather than argue over them, get the best price you can for them. This chart also tells us that participation features are probably more of a nice-to-have rather than a must-have. You may not have to negotiate as hard to remove those terms from the investment. Redemption rights and dividends are almost throwaway terms (hence the VC flexibility) because if those even enter the discussion, the investment is way underperforming. Wondering about negotiating the terms of your deal? Let's talk. #unblakeable #valuation #venturecapital #negotiation My name is Mike (Stage Name - Unblakeable) - Supporting you with the information you need to make your best business decisions at your most critical moments. Liked this post? Want to see more? Ring the bell on my profile. Connect with me (also @unblakeable on Instagram, Facebook, and Twitter) Subscribe to my newsletter (link in my profile) for more in-depth analysis Join the LinkedIn group "Unblakeable's Group That Doesn't Suck" Welcome!

If your venture is confronting a down round, you should not wear it as a badge of shame. Even in normal times, few ventures make an uninterrupted march up and to the right on the valuation curve. More importantly, if you are doing a down round, it still means you were able to raise capital. Although a down round will dilute your economics, no venture has ever died from excess dilution, the same cannot be said for lack of funds. Down rounds can be a fiduciary minefield for officers and directors and require a lot of advance planning. For details see the attached article. https://lnkd.in/gSXCPs42

Cross-Fund Investing: Potential Pitfalls and Considerations Cross-Fund Investing: What You Need to Know Some venture capital firms invest from multiple funds (e.g., VC Fund III and VC Fund IV) to support companies. This is called cross-fund investing. Potential Issues: * Later rounds may have different valuations than earlier rounds. * Different Limited Partners (investors) in the funds may end up with different returns. * In a down situation, one fund may be disadvantaged over the other, leading to conflict. One Exception: Early-stage firms sometimes create "Opportunity" or "Select" funds to invest in their successful companies at later stages. This allows early-stage investors to participate in their wins. #StartupJourney #VentureInsights #Entrepreneurship #TermSheets #TohundGuide

Following a prolonged period of excessive investment pace, the venture capital market is normalising. In their latest article, Titanbay consider the changes in fundraising and dealmaking and where private market investors might find opportunity. #familybusiness #familyoffice #investment #privatemarkets #venturecapital

Pitching to a Venture Capital firm is different from any other kind of pitch. It's not like a sales pitch, a product pitch, or any other kind of presentation for one simple reason: A lot of money is involved and it's money the Venture Capital firm won't give away to just anyone; they want that money to work; to be secure and grow so they are going to choose who they give it to very, very carefully

More on the differences between private equity and venture capital. While I think there are some differences between these types of investors and their investment style, the lines can be blurry, particularly if there is money to be made in a given situation. #venturecapital #privateequity

Raising Capital for Your New Venture: Structuring an Equity Raise in 10 Steps Fundraising and venture capital is exceptionally difficult. Understanding the key decision points won't make the process easy, but it will help. Here's a 10-step guide to consider: Structuring Investments: Financial and Business Issues 1. Structure of Raise: Non-priced rounds like convertible notes or SAFE are simpler, but might not be suitable for bigger raises. Priced rounds demand a company valuation and setting a price per share. 2. Valuation: It's a balance between not diluting too much equity and attracting investors. 3. Waterfall: How will the repayment work in an exit scenario? Will investors be prioritized? 4. Governance: Consider investor board seats, veto rights, and safeguarding both the company's and investors' interests. 5. Other Deal Terms: Include anti-dilution, pro-rata rights, drag-along, and more. Align the raise with market terms or unique situations. Logistical and Legal Issues 6. Lead or No Lead: Having a lead investor can offer credibility and momentum but isn't essential. 7. Mechanics of the Raise: Decide between a single closing or rolling closings. Set a minimum raise if needed. 8. Existing Investors: Check if they have preemptive rights, compare the valuation dynamics with previous rounds, and consider any impacts on anti-dilution rights. 9. Cannabis Regulatory Considerations: For cannabis companies, navigate through additional state regulations and investor disclosures. 10. Exemptions from Securities Registration: Ensure your offering complies with securities laws. The financial landscape can be intricate, so always consult with an attorney before embarking on this journey. Remember, raising capital is as much about forging partnerships as it is about securing funds. #RaisingCapital #EquityFinancing #Startups #VentureCapital