Jason Mendelson

This is a great reference for any entrepreneur (or probably non-venture-specialist lawyers, or new investors) on how startup financing is structured. A lot of the term by term specifics on term sheets and acquisitions are a bit obscure, and some are really important and others aren't, so having a good framework to understand everything is great. The one problem with a book like this is "prevailing terms" often vary by geography and industry (and how hot your deal is), so it's still worth having great advisors and a peer community of other entrepreneurs for advice, but this book is a solid foundation.

Some of the best advice is to try to get as much of the meaningful structure of the deal negotiated as early as possible, between business principals, rather than leaving it to lawyers, and that some specific types of transactions lend themselves to reputation-based win/win negotiation and other types of financing transactions are single-round and selfish.

There's some good advice on negotiation of financing deals as well, although anyone negotiating deals regularly (not just financing, but also sales, employment, etc.) should learn a lot more about negotiation itself.… (más)

* Lead investors tend to contribute a majority of capital in a round
* There are all kinds of VC funds—make sure you’re talking with a fund that specializes in your sector and stage (seed, growth, late-stage)
* Your VC has raised money just like you have—General Parters generally contribute 1%-5% of a fund, with Limited Partners contributing the rest
* Ask your VC their strategy for follow-on funding (the pool of funding they have set aside to participate in future rounds)
* Make sure you’re talking with a decision maker at the fund before getting your hopes up—usually a General Partner
* When coming into negotiations, choose a few key fundamentals and be willing to compromise on the rest, as well as knowing at what threshold you should step away from the deal
* Most VC funds last anywhere between 10 and 17 years; if your VC invests, this is the beginning of a long relationship (and is about a lot more than the money)
* VCs will do everything they can to gain control over key decisions in the future of your company while having a minority stake
* Make sure you understand all of the terms in your note; there are dozens of industry-specific terms that can have a lot of bearing on the future of your company; also understand what terms matter and what terms don’t. Don’t sign anything you don’t understand.
* Don’t propose a term sheet/price to a VC; let them play their hand first and negotiate from there
* Never tell a VC who else you’re talking to, unless you want them to form a syndicate
* Your lawyer is a reflection of you. An excellent lawyer is worth every penny.… (más)