This document summarizes key points about negotiating a deal. It recommends seeking "blue ocean" partners who will help grow the business rather than view it as a zero-sum game. Negotiators should find non-financial leverage, talk to multiple potential partners to create optionality, and establish their best alternative to a negotiated agreement. Business strategies, not lawyers, should drive deal-making. Small teams are better than committees for negotiations. Current investors and trusted mentors can provide advice without conflicts of interest. Term sheets must address ownership, control, recruiting and understand all terms. Deals should be structured by starting with a realistic valuation and ensuring incentives are aligned.

1. 2014 GloSho Bootcamp
Negotiating a Deal
October 2014
This presentation is privileged and confidential

2. 1
DEVELOPING A NEGOTIATING STRATEGY
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Seek “blue ocean” partners
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Working with “grow the pie” vs. “zero sum” partners is the only way to go
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Find as many non-financial levers as possible
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Sharing non-financial elements with investor reduces dilution
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The best partners/investors are people/groups who bring something beyond money
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Negotiating with only one group isn’t negotiating
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Job one is to create optionality for the company
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Talk to as many people as possible
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Give exclusivity as a last resort
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Establish a BATNA
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Understand your personal “walk away price”
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Don’t be afraid to fire “bad investors”
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Business people drive strategy not attorneys
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Attorney are hired for two reasons – to figure-out how to execute business deals and to protect entrepreneurs
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If you let attorneys drive strategy, you will pay too much, waste time, anger investors and end with an over-engineered solution
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

3. 2
WHO SHOULD BE INVOVLED?
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Smaller is better
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Smaller groups are easier to manage when negotiating tough points
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Committees don’t work
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Mentors, mentors, mentors
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Seek advice from trusted mentors who don’t have a financial interest in what you do
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Nothing like having a totally disinterested view on a deal
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Keep current investors in the loop
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If you already have professional investors (i.e., not friends and family), keep them up to speed
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

4. 3
UNDERSTANDING TERM SHEETS
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Ownership, control and recruiting
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Understand what the fully diluted ownership will look like
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Think carefully about how the various classes of stock affect / create control
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Make sure to get enough in the option pool to attract the right talent
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Don’t agree to terms you don’t understand
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Investors are around for a long, long time
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Bad business deals  unhappy people  failed businesses
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Look for hinder inequities
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Strive to ensure those who add the most value get the biggest payout
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Use attorneys to check market standards
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Anti-dilution provisions
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Preferred structure (participation & caps)
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Preferred interest rate
(a) Past performance is not indicative of future results. Refer to page 9 for detailed investment performance and page 33 for footnotes.
CONFIDENTIAL

5. 4
STRUCTURING A DEAL
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Begin at the end and work backwards
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Have a realistic view of value before you begin structuring
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High Growth vs. High Cashflow
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Technology vs. Development Risk
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IPO / Trade Sale / Recap
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Seek (don’t just talk) for win-win situations
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When incentives are aligned, you don’t need to consider how others will react to tough situations
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Be realistic about your negotiating position
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Market size, technical talent, required capital, personal risk tolerance, channel strength & need for speed
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Don’t take it personally
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Low valuations aren’t always about your ability to execute or your value as an entrepreneur
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If a deal is good, investors want more not less – thus lower prices
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Put something back on the table at the end
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Once you have everything you want/need – give something back
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Banking goodwill for the tough times is always smart
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Carve out a small piece (<5%) for charity – easy to do when things aren’t worth much
CONFIDENTIAL