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Playing Minesweeper With Term Sheets
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Playing Minesweeper With Term Sheets

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  • 1. (aka “How to read the fine print when you raise venture money”) Vishy Venugopalan @midtownninja; http://midtownninja.com vishy.v@gmail.com
  • 2. Get an idea 1. Get a team 2. Angel Funding ??? Hiring 3. Venture Capital Product dev & sales Profit 4.
  • 3. A non-binding expression of firm interest A negotiable document Gets hairy and technical very quickly Let’s navigate this minefield together!
  • 4. Pre-money vs post-money For early stage startups, this is hard BUT, important to get it right Single takeaway from this talk GET YOUR VALUATION RIGHT
  • 5. The unit of ownership is a share Classes of shares: preferred vs common At exit: participating preferred Multiple preferences
  • 6. New stock options are created for future hires Lowers effective pre-money valuation Example
  • 7. Up round vs down round Down round: investors expect to be made whole Full-ratchet vs weighted average
  • 8. Why do you need a VC? Money Expertise, Network Customers vs investors as sources of money Build a stable business or move to next thing? Remember: you can’t divorce your VC
  • 9. Google “Fenwick & West term sheet survey” Venture Hacks: http://venturehacks.com/ Ask the VC: http://www.askthevc.com/blog
  • 10. @midtownninja, http://midtownninja.com Currently: Analyst at Longworth Venture Partners In prior lives: software developer on Wall St, industry research analyst vishy.v@gmail.com