Venture Deals often comes recommended as one of the most practical reads for newly minted VCs, and for Founders looking to raise money. It covers all the key terms that come into play during the fundraising process. Here are some of my quick takeaways:
The first thing to do when entering the market is to figure out why you want to raise capital, and if your business is venture-backable. If you do decide to raise VC funding, it’s important to figure out how much you want to raise and how this gets you to your next milestone. Feld and Mendelson recommend having a specific number, instead of a range.
If a VC passes on your business, always try and get feedback. If you are lucky enough to receive a term sheet, make sure you do references on the VC. Many people liken the Founder / VC relationship to a marriage. However, with marriages, divorce is always an option, even if it’s an ugly one. The Founder / VC relationship is more like having a child. Once you take money from a VC, it’s very hard to get rid of them. You’ll be in the trenches working on your company for the next 5+ years, regardless of how much you like the VC. The best references will come from their portfolio companies that have been through tough times.
In terms of the term sheet, the two primary things to focus on are economics and control. Let’s dive into both.
Economics of the Term Sheet
Control Terms of the Term Sheet
Other Terms of the Term Sheet
Other Things to Keep in Mind