John Wiley & Sons Inc Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

I was very pleased to receive an advance copy of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist the other day. After reading it, I've concluded that it's like having a super-mentor on your shelf.I have been extraordinarily fortunate throughout my career to have been blessed with amazing mentors. Men like Will Harvey and Steve Blank have been there to help me, encourage me, and push me to do better. For any entrepreneur, these super-mentors are one of the secret weapons that can make a difference: answering difficult questions, making key introductions, or offering sage advice.However, there is one thing that the best mentors do which is most important: they can help you figure out what the $@%@$ is going on. When things get really tricky, often we find ourselves asking the wrong questions, or not even knowing enough to ask.When raising money, for example, you might think that most negotiations happen in a rational way, over just a few deal points that have a clear meaning. You might think that "company valuation" refers, naturally, to how much your company is - you know - valued. But this kind of thinking will get you in trouble fast. Because in reality, these negotiations hinge on hundreds of hidden factors, incentives, and sources of agency bias. Nothing is straightforward, especially if you haven't done it before. These are the moments when the truly great mentors stand out in their ability to cut through the BS and help you understand the motivations and systems that are driving seemingly incomprehensible behavior.All of this is by way of saying that if you already have a mentor of the caliber of a Steve Blank or Brad Feld on speed-dial, you probably don't need to read Brad's new book Venture Deals.What's that you say? You don't - or you're not sure? Well then, you absolutely, positively, without-any-doubt have to read Brad's new book Venture Deals.When I received my advance copy, I was a little worried. I generally try and stay away from topics like "how to raise VC" or "how to sell your company" because the startup landscape is already saturated with tips and tricks. And reading a term sheet has all the entertainment value of watching dried paint get even drier.But Venture Deals is quite a surprise: it's readable, engaging, and addresses issues way below the surface.It is not a how-to manual or a collection of tips. It's an in-depth explanation of what the @$%$ is going on when an entrepreneur considers raising money or doing an M&A transaction. And even if you don't think you're going to do that for your startup, this is very valuable information to have - because you never know who might approach you in the future. This is a book you'll want to have handy, just in case.I've dealt with a bunch of different kinds of investors over the years, from so-called "dumb money" all the way up. The hardest thing to understand when working with them is that they are subject to forces and incentives that are rarely disclosed openly. When I came to Silicon Valley, I was inducted into a body of accumulated wisdom about how to handle them. This is the same advice I hand down again to entrepreneurs who are seeking my counsel. That advice is completely consistent with what's contained in Venture Deals.For example, the right way to think about a term sheet is as a negotiation over just two things: economics and control. Everything in a term sheet is negotiable - if and only if you already have sufficient leverage. (Do you know the sources of leverage in a VC deal? Wouldn't you like to?) There are many founder-friendly terms you can push for, from automatic acceleration to reduced vesting - but each risks reducing the alignment of interests between founders and investors. And even if you're an old pro at raising money, you're likely to find a few surprises in here. Are you sure you know the formula for how your VC reserves capital for your future rounds (I didn't)?And even the most battle-tested entrepreneur would be forgiven if they were a little confused by the following bit of poetry in a term sheet:"Antidilution Provisions: The conversion price of the Series A Preferred will be subject to a narrow-based weighted average adjustment to reduce dilution in the event that the Company issues additional equity secuities..."Now even though us old pros know that there are different kinds of antidilution provisions, are you absolutely sure you remember which one is the good kind and which is the horrible kind that caused all those problems in 2001? Are you sure your lawyer will catch it if the formula isn't quite right? Wouldn't you rather be sure? I've lived through a crisis where a company's antidilution provisions kicked in and nobody could agree on how the formula was to be interpreted. I wish I'd had this book on my shelf back then.Which brings me back to my claim at the top about having a super-mentor in book form. Venture Deals explains not just what to do but why it works that way. Every VC term sheet I've ever seen has come with a claim that its terms are all "entirely standard" and "as simple as possible" - whether it was one page or a dozen pages long. That can be frustrating, but what do you do about it? Which terms really are standard for good reasons, which are standard for bad reasons, and which are just gotchas designed to skew the negotiation?Venture Deals has negotiating tips, same as other books, but - much, much more importantly - its negotiating section is called What Really Matters? When you're in the thick of it, only a truly great mentor can tell you which provisions are negotiable, which are negotiable-but, and which are really non-negotiable. ("negotiable-but" means you can possibly win that fight, but it will damage your reputation in the process.)Now, it's important to keep in mind that Brad and Jason are themselves VC's, albeit ones with an entrepreneur-friendly reputation. So you always have to take their advice - like anyone's - with a grain of salt. But they've thought of that, too. Throughout the book, they've given space for brief commentaries by an experienced entrepreneur, Matt Blumberg, CEO of Return Path. In several places he gives an important counterpoint to Brad and Jason's perspective. It's a combination that is unique to this book.I hope all of you who are reading this - no matter where you live, no matter what kind of company you have - will one day get to make the pilgrimage to Sand Hill Road in Silicon Valley, or another famous startup hub. It's an exhilarating experience. But it's not without its risks. As the old saying goes, "watch your wallet." And bring your copy of Venture Deals.

Verständliches Englisch, interessant geschrieben und man erhält einen guten Einblick in die Funktionsweise von Venture Deals. Kann das Buch jedem empfehlen, der sich generell für das Thema interessiert, gerade selber ein Startup aufzieht und Investoren sucht oder wer eben mal hinter die Kulissen blicken möchte ("Facebook, Twitter möcht ich auch!").

A must read for anyone interested in entrepreneurship and looking to launch their first startup.Full of very practical and helpful insights.

Overall a very clear, concise, well-written guide to venture capital for entrepreneurs. This book demystified a bunch of things I had wondered about or misunderstood for years based on snippets of information I picked up living in Silicon Valley and working in tech. It's compact and easy to read; I think the authors struck a good balance between including enough material and keeping the book to an easily-digestible length.The centerpiece of the book is a term-by-term analysis of the term sheets commonly presented by venture capitalists to entrepreneurs. The authors provide sample language for each term, describe the common variations, explain what each term means, and indicate which terms you shouldn't worry about, which you should negotiate strongly, and which you should care about but will probably have to take as-is. They also categorize the terms as "economic", "control", and "other", which I found very helpful.Apart from the term sheet, the book includes a very helpful discussion of the structure of venture capital firms and the VC industry. For example, they cover different roles and job titles in VC firms, answering questions like what a "principal" is vs. a "managing director". I always thought "principal" sounded super-important and I was amazed when I heard of people receiving this title soon after business school, but it turns out I was confused. They also discuss the relationship between the management company and the individual "funds", how VCs raise money, and so forth. One thing I didn't know that is very interesting is that when making an initial investment in a company, VCs reserve an additional specific amount on their books for future investments in that company.Finally, the book includes shorter chapters on negotiation, letters of intent (the "term sheet" of acquisitions), and legal things entrepreneurs should know.Overall, this book is packed with useful information and written with just enough personality to make otherwise dry information more palatable.What didn't I like? There were a couple of things that I thought could have been explained more clearly. I was able to understanding participating preferred stock, but it took me longer than I think it should have. I still don't know what registration rights are or exactly how weighted-average antidilution works. (Granted, registration rights are one of the terms they consider unimportant.)Finally, I have mixed feelings on the chapter on negotiation. It was interesting and useful (I particularly liked the advice to keep the entire deal in mind, rather than getting drawn into point-by-point agreements), but I'm still not sure if it's worth the space--there seem to be lots of good books out there on this topic. I do appreciate the effort to make this book one-stop shopping, though.These shortcomings aside, an incredibly helpful book and highly recommended.

Every entrepreneur seeking VC financing should read this. Don't ever talk to a VC before. I mean it. The book covers the basics of an industry that as an outsider is impossible to understand.