A Serial Entrepreneur’s Take On Brad Feld & Jason Mendelson’s Venture Deals - Page 2
• Focused Negotiating – Brad and Jason do an excellent job of explaining common negotiating tactics deployed by VCs. However, their most salient advice is that entrepreneurs should focus on two factors: economics and control. As they state, “We suggest that any significant time you are spending beyond these two core concepts is a waste of time.” They then dissect a typical term sheet and identify which terms impact: (i) economics, (ii) control, (iii) both and (iv) neither. They also remind emerging entrepreneurs that the power is not solely held by the VCs and encourage entrepreneurs to, “Figure out your superpower and your adversary’s kryptonite.”
• Don’ts – As noted in greater detail below, I especially like the chapter entitled, “Raising Money The Right Way.” This chapter provides spot-on, tough-love advice. Entrepreneurs should take this chapter to heart, because commission any one of these mistakes will immediately mark them as a rookie.
Things I Liked
• Entrepreneur’s Voice – Matt Blumberg, CEO of Return Path serves as the voice of the entrepreneur, punctuating the text in periodic sidebars. For instance, in a section describing the ramifications of a No-Shop clause, Matt writes, “Insist on spelling out key terms prior to a signed term sheet if it has a no-shop clause in it. A VC who won’t spell out key employment terms at the beginning is a big red flag.” He goes on to recommend that, “…you should also ask that the no-shop clause expire immediately if the VC terminates the process. Also, consider asking for a carve-out for acquisitions.” Such detailed, practical counsel can prove to be priceless.
• VC Firms Unveiled – As the VC world is relatively small and a bit clubby, many internal aspects of the industry, such as: how firms are structured, the manner in which VCs reserve for follow-on investments and the various fiduciary hats a VC must wear, are not always obvious to emerging entrepreneurs. Venture Deals demystifies the VC landscape and helps entrepreneurs understand the typical VC’s motivations, responsibilities and priorities.
Things I Liked Less
• Price – I am cheapskate. The hardcopy list price of $49.95 is frankly a bummer (to be fair, Amazon offers the book new for $33). Fortunately, you can download the Kindle edition for $27 and the audio version for $18. I normally would advise readers to purchase the cheapest offering. However, some of the book’s value is lost in an audio format, as it is difficult to derive value from the book’s numerous sample contract provisions via an audio recitation versus written text.