Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Foreword Fred Wilson Foreword Dick Costolo Foreword James Park Preface Acknowledgments Introduction: The Art of the Term Sheet Chapter 1: The Players The Entrepreneur The Venture Capitalist Financing Round Nomenclature Types of Venture Capital Firms The Angel Investor The Syndicate The Lawyer The Accountant The Banker The Mentor Chapter 2: Preparing for Fundraising Choosing the Right Lawyer Proactive Versus Reactive Intellectual Property Chapter 3: How to Raise Money Do or Do Not--There Is No Try Determine How Much You Are Raising Fundraising Materials Due Diligence Materials Finding the Right VC Finding a Lead VC How VCs Decide to Invest Using Multiple VCs to Create Competition Closing the Deal Chapter 4: Overview of the Term Sheet The Key Concepts: Economics and Control Chapter 5: Economic Terms of the Term Sheet Valuation and Price Employee Option Pool Warrants How Valuation Is Determined Liquidation Preference Pay-to-Play Vesting Exercise Period Antidilution Chapter 6: Control Terms of the Term Sheet Board of Directors Protective Provisions Drag-Along Agreement Conversion Chapter 7: Other Terms of the Term Sheet Dividends Redemption Rights Conditions Precedent to Financing Information Rights Registration Rights Right of First Refusal Voting Rights Restriction on Sales Proprietary Information and Inventions Agreement Co-Sale Agreement Founders' Activities Initial Public Offering Shares Purchase No-Shop Agreement Indemnification Assignment Chapter 8: Convertible Debt Arguments for and Against Convertible Debt The Discount Valuation Caps Interest Rate Conversion Mechanics Conversion in a Sale of the Company Warrants Other Terms Early-Stage versus Late-Stage Dynamics Can Convertible Debt Be Dangerous? An Alternative to Convertible Debt Chapter 9: The Capitalization Table Price Per Share with Convertible Notes Pre-Money Method Percentage-Ownership Method Dollars-Invested Method Chapter 10: Crowdfunding Product Crowdfunding Equity Crowdfunding How Equity Crowdfunding Differs Token Crowdfunding Chapter 11: Venture Debt The Role of Debt versus. Equity The Players How Lenders Think about Loan Types Economic Terms Amortization Terms Control Terms Negotiation Tactics Restructuring the Deal Chapter 12: How Venture Capital Funds Work Overview of a Typical Structure How Firms Raise Money How Venture Capitalists Make Money How Time Impacts Fund Activity Reserves Cash Flow Cross-Fund Investing Departing Partners Corporate Venture Capital Strategic Investors Fiduciary Duties Implications for the Entrepreneur Chapter 13: Negotiation Tactics What Really Matters? Preparing for the Negotiation A Brief Introduction to Game Theory Negotiating in the Game of Financings Negotiations Other Games Negotiating Styles and Approaches Collaborative Negotiation versus Walk-Away Threats Building Leverage and Getting to Yes Things Not to Do Great Lawyers versus Bad Lawyers versus No Lawyers Can You Make a Bad Deal Better? Chapter 14: Raising Money the Right Way Don't Be a Machine Don't Ask for a Nondisclosure Agreement Don't Email Carpet Bomb VCs No Often Means No Don't Ask for a Referral if You Get a No Don't Be a Solo Founder Don't Overemphasize Patents Don't Be Silent if You Witness Bad Behavior Chapter 15: Issues at Different Financing Stages Seed Deals Early Stage Mid and Late Stages Chapter 16: Letters of Intent--The Other Term Sheet Structure of a Deal Asset Deal versus Stock Deal Form of Consideration Assumption of Stock Options Representations, Warranties, and Indemnification Escrow Confidentiality/Nondisclosure Agreement Employee Matters Conditions to Close The No-Shop Clause Fees, Fees, and More Fees Registration Rights Shareholder Representatives Chapter 17: How to Engage an Investment Banker Why Hire an Investment Banker? How to Choose an M&A Advisor Negotiating the Engagement Letter Helping Your Banker Maximize the Outcome Chapter 18: Why Do Term Sheets Even Exist? Constraining Behavior and the Alignment of Incentives Transaction Costs Agency Costs and Information Asymmetry Reputation Constraints Chapter 19: Legal Things Every Entrepreneur Should Know Intellectual Property Employment Issues State of Incorporation Type of Corporate Structure Accredited Investors Section 409A Valuations (83)b Elections Founders' Stock Consultants versus Employees Compensating Service Providers Trademarks Patents Author's Note Appendix A: Sample Term Sheet Appendix B: Foundry Group Term Sheet Appendix C: Sample Letter of Intent Appendix D: Additional Resources Glossary About the Authors Index Excerpt from Startup Communities