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on July 1, 2013
I am a 2x entrepreneur who has raised over $20M in VC funding, so when i say this is a must-read IF you want to raise money I am speaking out of experience.
I wish I had this book in 2007, when I was trying to raise money. Terms like "double ratchet anti-dilution", "preferred", "participation", "vesting pool' or "liquidation events" were all terms that I was completely ignorant about. worst yet, our attorneys had to explain these to me, and at $750/hr it was a costly lesson. $30 for this book would have saved me $1,000's in legal fees, and hundreds of thousands in earnings.
Well, but now that i have read this book my long-held view about VCs is further perpetuated.
VCs are in the business to accomplish two things: (1) preserve their LP capital (i.e. don't lose money). and (2) earn outsized earning to makeup for all the duds (i.e. take everything you can).

Note, "make the entrepreneur lots of money" is not on the list. This is something that the authors and most VCs, including Mark Suster on his talks/blogs will confirm this. As an entrepreneur you end up working for the VCs and will get wealthy if your company ends up being one of the 0.01% of VC companies that have very successful exits. If your company does just "great", or "OK" then expect to earn nothing from the exit - while the VC will walkaway with 2x to 5x of the investment.
This is not a bad thing if you expect to be in the 0.01%, but as that number indicates - it's not likely.

so lets look at the main two things covered in this book that describe how VCs make money:

VCs get their money from pension funds, alternative asset funds, government organizations, and basically any large sources of capital that is looking for risk-adjusted better-than-average returns. these are the clients of VCs and these are the folks they are accountable to. So if they don't produce the expected returns, or worse yet lose their capital they won't be in business for too long.
To increase the odds of staying in business they do two things:
(a) push the risk to the entrepreneur and all the "common" investors - do you own "common stock" or "preferred stock"? 'nough said.
(b) make the ownership disproportionate to the proceeds of liquidation - meaning, if the ownership is split 50/50 between the founder and the VC then during the sale most of the proceeds (60% to 80%) will go to the VC.

this is done by instruments like "preferred class", "full participation", "anti-dilution" and other similar means that create asymmetry in risk/reword. Just read chapters 4 and 5 of the book if you need to see examples.
BTW: Does this sound familiar? we had a similar situation in the financial crisis of 2008. Banks created asymmetry in the housing market where they held disproportionate amount of the reword while the risk was pushed out to the homeowner and rest of the economy.

So, if as an entrepreneur and you have created a business that is cashflow-positive, and has a great product and market opportunity then think twice about the VC option. There are many other ways to raise money - loans, venture debt, private equity, and good ol' sales...
Granted, this might not be the fastest way to grow your company and presents the risk of being overtaken by a well-funded company. But if you know that the market is big enough for more then one player (even if you're #2), and you want to keep a larger amount of your hard-earned money and reduce the influence of VCs then think twice about the VC option.

But if you think your company is the next Facebook or Google then go for it. However, most founders endup working in "indentured servanthood" to VCs because they end up relinquishing control and ownership of the company while working long hard hours for little pay.

Buy this book. Read it. Explore all your capitalization options. Weigh the costs and benefits. But whatever you decide make sure to focus on creating a kick-a$$ products for a kick-a$$ markets more so then about raising money. If you have a great company money will find you.
Hope this helps your decision process.
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on May 15, 2016
This is the second time in my life I find myself doing the rounds to collect proper money from investors. First time, more than fifteen years ago, I used the Bagley and Dauchy classic “Entrepreneur’s Guide to Business Law” and I thought it was pretty good. This book is quite simply in a different league.

The authors, seasoned VC entrepreneurs, have a gift for writing and that’s what carries you through the book. It’s all very serious, of course, but the writing style is as far from dry as you can imagine.

So I’m reading this and the only thing that keeps me from saying “OK, boys and girls, this covers everything, it’s the gospel” is the simple fact that if I was a VC I’d write a book that makes the case for the VC’s interests rather than the entrepreneur’s. So from where I stand, and I’m an entrepreneur, I’d want an entrepreneur to have written the book.

The authors actually go a long way toward addressing this concern: the summary for every section has actually been written by entrepreneur Matt Blumberg and rather often it’s hardly a summary; it emphasizes different point from Brad Feld’s, lending credibility to the book and making the reader more comfortable.

So this is basically a tremendous book and if you’re raising money you need to buy it and read it. If for some mysterious reason you don’t want a preview, on the other hand, look away now, because what follows is my summary of the key points:


Chapter 1: “The Players”
• You need to be talking to a Managing Director or a General Partner
• You need a good, experienced lawyer: this is an awful place to skimp
• Mentors are great

Chapter 2: “How to Raise Money”
• You need an elevator pitch, an executive summary and a 10-slide powerpoint presentation
• “We haven’t seen a business plan in more than 20 years”
• Your financial model must get the potential expenses right; forget about nailing the revenues
• Do your homework on your VC and don’t press any clearly advertised wrong buttons
• If you feel like your VC is a proctologist, run for the hills
• Ask your VC for references from entrepreneurs

Chapter 3: “Overview of the Term Sheet:
• It’s not a letter of intent; it’s a blueprint for your future relationship with your VC
• Two things matter: economics and control

Chapter 4: “Economic Terms of the Term Sheet”
• Understand the difference between pre-money and post-money
• The VC will try to stick the options pool in the pre-money valuation
• You must have a Plan B to be able to negotiate good economic terms
• Competition aside, valuation will depend on the stage of the company, the team’s experience, the numbers, the suitability for the VC and the economic environment
• Liquidation Preference arises because VCs come in with preferred stock and means the VC gets its money first. This can be very dilutive if the next round is a down round.
• Fully Participating stock receives its participation amount and then shares in the liquidation process on an as-converted basis
• A cap can be put on the participation
• Under “pay to play” provisions, investors who do not participate in the next round get converted to common stock.
• Typically, employee stocks and options will vest over four years and disappear if somebody leaves
• Consideration must be given to treating the vesting as clawback with an IRS Section 83(b) election
• Acceleration of vesting upon change of control is a key feature, don’t leave it out!
• Antidilution provisions may be requested by the investor for the case where new common stock is created after the financing

Chapter 5: “Control Terms of the Term Sheet”
• At the beginning it will be 1. Founder, 2. CEO, 3. VC, 4. 2nd VC, 5. outside board member
• Don’t allow observers on your board
• Make sure the Protective Provisions allow you to borrow a reasonable amount of money
• Your investors need to vote as a single class
• There will be a drag-along provision (majority of shares on as-converted basis is the law in Delaware)
• There will be a conversion clause (so VCs can vote alongside common stock when they must)
• An automatic conversion clause can be there to force VCs to give up on their preferred ahead of a sale.
• If there is an automatic conversion threshold, it must be the same for all classes of stock.

Chapter 6: “Other Terms of the Term Sheet”
• Dividends might be requested by dorky VCs with Private Equity background.
• Noncumulative dividends that require board approval are OK. Supermajority even better.
• Redemption rights on the preferred (say after 5 years) can be put in by VCs that have the maturity of their fund in mind.
• Adverse Change Redemption Rights are evil, because there is no good definition for adverse change.
• Conditions Precedent to Financing should be avoided at all costs.
• Information Rights are A-OK.
• Registration Rights are A-OK. The world is good if you’re going public.
• Right of First Refusal had better be restricted to big investors.
• Right of First Refusal had better be pro-rata.
• Restriction on Sales is a clause that allows the company itself the right of first refusal.
• The Proprietary Information and Inventions Agreement is a clause you actually need.
• A Co-Sale Agreement allows investors to sell along with founders.
• A No-Shop Agreement had better expire automatically if the sale falls through and should have a carve-out for acquisitions.
• A standard Indemnification clause is good corporate hygiene, but it means you need to buy directors’ insurance.
• The Assignment clause needs to be read carefully: look for the loophole “assignment without transfer or the obligation under the agreements” which should not be there.

Chapter 8: “Convertible Debt”
• Convertible converts at a discount to the next financing.
• The purpose is to defer the discussion about the value of the company.
• A floor on the value of the stock protects the entrepreneur.
• A ceiling protects the investor, but can hurt everybody because it guides (caps!) the next investors on price.
• You should put a reasonable time horizon on an equity financing as a condition, or you will find the debt converted before you had time to do the financing.
• You should set upfront the minimum amount of financing that triggers the conversion.
• The interest rate on the debt should be as low as possible.
• There must be clauses regarding the sale of the firm while the debt is outstanding.
• Technically, a startup with convertible debt is insolvent!!!
• Warrants attached to debt are an alternative to the discount on convertible debt.
• Warrants should deliver the most recent class of stock at the most recent round’s price.
• Warrants are long-term (e.g. 10 year) call options.
• Warrants had better expire at a merger/acquisition unless they are exercised prior to the merger.

Chapter 9: “How Venture Capital Funds Work”
• Fees received from the LP are higher during the “Commitment Period” during which funds can still be committed to new investments.
• Follow-on investments can still be made during the investment term of the fund.
• VCs recycle their management fee into the LP if returns during the early life of the fund are good.
• If a fund is approaching the end of its life, you don’t want them to invest in you and most probably they can’t anyway.
• Ask your VC when they made their last investment. If it was more than 12 months ago, run for the hills.

Chapter 10: “Negotiation Tactics”
• Get a good result, do not kill your personal relationships and understand the deal you struck.
• This deal is not your lawyer’s.
• Find out who you are dealing with.
• Have a solid Plan B.
• Get the VC to tell you the top 3 things he wants (erm, good luck with that, I say)
• Always be transparent.
• Never make an offer first.
• Understand what market terms are.
• Bear a bad deal, because the acquirer might deliver you from it.

Chapter 11: “Raising Money the Right Way”
• Don’t ask for an NDA.
• Don’t carpet bomb VCs.
• No means no.
• Don’t be a solo founder.
• Don’t overemphasize patents.

Chapter 13: “Letters of Intent – The Other Term Sheet”
• (N.B. that means you’re selling the firm)
• They will beef up the options plan, right out of the offer they’ve shown you.
• An asset deal is crap: you have no assets but must still close the firm down.
• If they are offering illiquid stock, that’s something you’ll need to invest the time to evaluate yourself!
• You will have to give representations and warranties and if they are qualified by “to the extent currently known” you will have to sign them.
• Escrow is the practice whereby part of the offer is put to one side until some conditions have been met. This is a big burden, especially if the consideration is in stock. Fight it as much as possible.
• No-shop clauses should expire the moment the buyer terminates the process.
• Don’t negotiate your deal at the beginning (that looks awful) but don’t leave it last either.

Chapter 14: “Legal Things Every Entrepreneur Should Know”
• IP issues can kill a startup before you even really begin.
• Delaware
• Non-accredited investors have a right of rescission!
• Don’t forget to file an 83(b) Election
• When you write options to your employees, get them 409A - valuated
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on February 17, 2017
When I picked up Brad and Jason's Venture Deals for the first time, I read through the entire book without setting it down. Having both launched a company and worked in venture capital prior to reading this book, I wish I knew this resource was here when I was first getting started as it would have made for a great backdrop as I went about fundraising, and truly distills the necessary knowledge and motivations in chewable bite sized chunks. Shortly after finishing the book, I had a question about one of the sections and emailed Jason and Brad at 2:30am. Within 6 hours I have a comprehensive response from Jason giving me more insight into the questions I'd raised and why everything isn't always as it seems in an acquisition scenario. Well worth the read for any aspiring entrepreneur or junior venture capitalist who feels out in the deep.
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on October 5, 2015
I thought this book was a great review of what you are likely to face as an entrepreneur seeking funding from a VC (or sophisticated angels). The detail of the various clauses and various versions of those clauses likely to be contained in a termsheet was extremely helpful. I was in banking for a long time and also ran a hedge fund so in principal capital raising isn't new to me but raising equity capital for a technology firm is a different animal.

As some other people have mentioned, these are VCs writing a book about their industry so it is going to have their perspective embedded in the text. But I thought it was a great primer that will save entrepreneurs money because they won't need to be taught this info by their lawyer (and I think you must have a lawyer to negotiate a funding deal unless you have lots of experience). Make sure you read about this topic from a number of different sources and investigate inconsistencies. One great tip I read (I can't remember if it was in this book) was to speak with the CEOs of companies that didn't do well or that have failed and ask how the VC behaved in those stressful times when they need to lookout for their LPs interests which may be at the expense of the entrepreneur.
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on January 16, 2017
We just closed an angel round and Venture Deals was absolutely indispensable throughout the whole process. There’s nothing else that comes close to giving you the systematic, step-by-step overview of the things you’ll run into while raising your first round and beyond.

I read it a year ago from cover to cover to get an overview of the terminology and general concepts…I’d say ~50% of it stuck when I read it the first time. I quickly skimmed it again as a refresher once we started the fundraising process and gleaned a lot more - and kept it on my desk to use as a reference a dozen or more times throughout. Even when it didn’t address the specific question, it at least gave a primer on the topic so I knew enough to research more.

Couldn’t recommend this book more highly for any founder who is raising money or thinking about raising money.
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on April 23, 2015
I read Brad & Jason's outstanding treatise, Venture Deals, from my own context as a guy with many billions of dollars, and multiple decades, of deal experience - but in a very different context (international oil, gas and minerals deals, typically in harsh political environments), i.e. that of corporate and project finance rather than Brad/Jason's context of "venture deals," as they wonderfully describe in their treatment. This difference of financial/deal perspective is important, I believe, in what I wish to say in giving my view of the relevance and usefulness of Venture Deals.

Whether "smaller" venture deals - of the, generally, under-$1 billion scope that Brad and Jason address - or the $10 billion to $100 billion scope of deals inherent to the global extractive resources space, the FUNDAMENTALS of financial, economic, legal, human, strategic, tactical and negotiations considerations are substantially the SAME.

It is these fundamentals that Brad and Jason so well, accurately and constructively describe in this fine book. Furthermore, as is obvious to anyone familiar with the significant achievements of Boulder-based Foundry Group, the narrative offered in Venture Deals is underlain by the voices of deep, well-tested and hardened experience in mobilizing real capital for real deals. So, save yourself, say, one to four graduate-level courses at places like Stanford or MIT Sloan, and instead, do these two things: i) give a good reading of Venture Deals; and then, ii) re-read, and deeply study, this same superb text with the critical eye of a person who's paying one's own way through any of the great, and expensive, graduate schools that purvey any of Finance, Law, or other related disciplines. These guys have really nailed it! And, your ROI for both time and money will be hugely rewarded.
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on October 3, 2014
This book is a MUST-HAVE for entrepreneurs. I'm currently a founder of a startup ( funded by an accelerator in Silicon Valley. Since I am a first-time entrepreneur, there was a lot I had to learn, especially in regards to fundraising.

I've read everything you can possibly read online, but nothing is as good as Venture Deals. Fundraising is hard, but they explain the process in a simple manner. The book not only explains fundraising concepts, but they present strategies as well.

I was a bit hesitant at first because the authors are investors. They could have very well written the book to help themselves instead of the entrepreneurs. After reading the book, I'm fully convinced that this book was written to give the entrepreneurs a leg-up, and not the other way around. Why do I think this? Because since reading this book, I have talked to countless investors and VCs. What I've learned has given me an advantage.

As a first-time entrepreneur, you'll make mistakes when raising money from investors. That's inevitable. But this book will help you make less mistakes.

I'll be honest. I tried to find a pirated PDF online (I live on a startup budget...). I reluctantly bought it when I couldn't find any (though I'm sure you could if you tried hard enough). I don't regret it one bit. Even if you find a pirated version, you should buy this book because you'll want to keep referencing back to it.

With the help of Venture Deals, our startup has already raised a good amount of money. I consider this one of my best investments.
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on October 8, 2015
I ordered Brad Feld's book Venture Deals a couple of months ago based on the reputation of both he and his coauthor, Jason Mendelson. I knew I'd surely get a few tips on the usual suspects; how much equity, negotiations, identifying the right long-term partnerships... all important but not really new content for my overflowing business library. What I got was a virtual treasure trove of information written in such a casual format I almost had the feeling the words were being delivered by a caring older brother who's sharing candid experiences a younger sibling. As an entrepreneur and the president of a young company, I face difficult decisions daily particularly in the world of raising capital. Many of the well written books I have now sitting on a lonely shelf covered with dust in my office are clear on strategy and best practices but they fail to say how and offer tactical advice. This book is filled with practical information and reads like a peer to peer conversation. I have the now dog-eared well worn copy sitting on my desk and refer to it several times a week. No dust collecting on this one...!
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on October 7, 2014
I am a first time entrepreneur in the CPG field just starting out for my first seed round financing. I have been running my business for 3 years but have recently made the switch from the "mom and pop shop" model to the large growth CPG model. I will update this review once the round is complete to let you know how much of the knowledge was practically useful for me. The reason I have already given it 5 stars is that, regardless of which side of the game you're on (investor or founder), you need to speak the language. This book, for me, has been an invaluable introduction to the "language" of the money-raising business. I have seen some negative reviews on here that I really don't understand. I see people claiming that this book is one-sided or that these guys are just trying to soften up the entrepreneurs so that we are easy prey for the evil VC's of the world. Let me just say....if this book is the ONLY research you do before a financing round, you deserve whatever you get. That being said, this should definitely be in your collection.

To be clear, I do NOT feel smarter than my lawyer or any decent venture capitalists, but I do feel significantly smarter than the version of me who had not read this book. There is a lot of info in the book that you can find in various blogs on the subject across the internet (including Brad's and Jason's) but this book is laid out pretty well and will give you a good starting point for looking things up on the internet. I read this with a notebook next to me so I could take notes on terms I needed to look up and things I wanted to figure out specific to my company. Then I would get on the computer and do searches for any questions on specifics I had.

Additionally, the subject matter is pretty dense for the uninitiated but they approach the writing with a wry wit that I certainly appreciate. They could have dumbed it down a lot more BUT I really appreciate that they didn't. It is very helpful to me the way it was presented because I can reread sections and analyze not just what they were talking about but HOW they talked about it. It has already helped me immeasurably in conversations with potential VC's and angels.

Thanks Brad and Jason!
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on July 5, 2014
I generally don't "Love" how to books, but this is a damn-good book. Make no mistake, it is written by VCs. While Brad and Jason do present the entrepreneurs' POV, they give the VC's version of the entrepreneurs' POV. Nevertheless, they break down every aspect of the term sheet and give priceless insight into the meaning and rational, along with what is and is not important to VCs. They also elaborate on what to look out for, what turns VCs off, how to spot a greedy VC, and how to choose and manage legal representation.

While it's not Shakespeare or Maya Angelou, it is priceless and incomparable for founders seeking VC. I highly recommend with no reservation. I also recommend researching Brad's other books, blog, portfolio, affiliated orgs (e.g. TechStars, UPGlobal, et al) and online talks along with the course of the same title on. Their hip-hop videos are also endearing. "I'm a VC" is catchy and a new personal fave.
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