Everybody negotiates. Some people like it, others hate it but all agree that the ability to negotiate well is a valuable business skill and therefore it’s something worth doing well. To be successful in negotiations with venture capitalists, you have to be tough, but it also helps to have a strategy. Fortunately, Game Theory provides us with insights that can lead to practical results. Creating value that can be captured is the essence of business. Added value equals total value created with the startupper in the game, minus total value created without the startupper in the game. One idea that we emphasize is working with what we term "complementors." A complementor is the opposite of a competitor.

1. S TA R T U P | S T R AT E G Y & G A M E
T E O RY I N F I N A N C I N G
!
SINGULANCE

2. YOU CAN PROACTIVELY
FIND YOUR OWN
MENTORS
!
!
Good mentors don't need to be imposed. You should
find your own mentor.
FUNDRAISING VS BOOTSTRAPPING

3. FUNDRAISING CAN BE A
DANGEROUS WASTE OF
TIME
!
!
Every minute you spend talking to investors is a minute
that could be used to improve your product. Many
startups lose focus on their product and customers,
spending too time with meeting investors.
FUNDRAISING VS BOOTSTRAPPING

4. YOU BECAME AN
ENTREPRENEUR TO BE
YOUR OWN BOSS
!
!
Exchanging equity for cash is not a one-time transaction.
Funded startups have to keep investors in the loop about
progress and constantly justify any business decision.
FUNDRAISING VS BOOTSTRAPPING

5. YOU DON'T NEED AN
ACCELERATOR TO GET A
CASH INJECTION OF 30000
USD FOR 20% EQUITY
!
Good accelerators are less than you imagine. In my
opinion many accelerators are just startups (like yours)
whose customer is the startup founder.
FUNDRAISING VS BOOTSTRAPPING

6. BOOTSTRAPPING
FORCES YOU TO LEARN
WHAT REALLY MATTERS
!
!
You are running a business because you love the
problems you are facing and the solutions you are
building. There is no time to experiment with things
that don't deliver increases in customer value.
FUNDRAISING VS BOOTSTRAPPING

7. THE BEST CONDITIONS TO
RAISE FUNDING ARE WHEN
YOU DON'T NEED IT
!
!
!
You can raise funding in the future. If investors want to
invest in your bootstrapped startup when you are
profitable, you can negotiate your terms, walking away
from deals that you don't like or that don't work for you.
FUNDRAISING VS BOOTSTRAPPING

8. ABOUT 600.000 NEW BUSINESSES
ARE STARTED IN THE US EACH YEAR.
THE NUMBER OF STARTUPS FUNDED
BY VCS IS ABOUT 300.
!
This means that the probability of an
average new business getting VC
is about 0.0005 (300/600,000),
and it also means that 99.95 percent
of entrepreneurs will not get
VC at startup.
WILL YOU GET VC?

9. MOST VCS LIKE TO INVEST IN
VENTURES AFTER THE POTENTIAL
HAS BEEN PROVEN AND THE RISK
REDUCED
!
!
!
In the first quarter of 2012, only 3% of VC funding went to
start-ups. So about 97% goes to ventures on a post-startup
basis. The number of ventures funded increases to about
3.250.
ARE YOUR ODDS BETTER IF YOU ARE AN EXISTING VENTURE?

10. THE AVERAGE AGE OF A
VENTURE AT VC FUNDING WAS
ABOUT FOUR YEARS
!
!
!
!
!
!
If you assume that the range was about 0-8 years, this means that there are about
4.800.000 ventures started in the eight year period.
So the probability that you will get VC funding at a later date is about 0.000068
(3.250/4.800.000), which means that 99.93 percent of you will never get VC.
WHAT ARE YOUR ODDS OF GETTING VC AT A LATER STAGE?

11. NOT ALL VENTURE CAPITALIST ARE THE SAME! AND, ABOVE
ALL, THEY ARE NOT ALL EQUALLY GOOD.
INVESTORS JUDGE STARTUPS. WHY DO NOT JUDGE INVESTORS?
!
!
!
!
!
!
!
!
!
!
!
!
!
Understanding venture capital performance is a broken process! What makes a good venture capitalist?
1) Performance persistence: in venture capital, past performance does indicate future performance [Marc Andreessen once said that
only 30-40 firms generate returns, while the vast majority of VCs is stuck with write offs and fire sales] .
2) Venture capital returns: simplistically, the best investment returns more money than the rest of the investments combined (venture
capital power law).
3) The selection aptitude: of course, simply “getting in” does not guarantee strong investment returns as the nature of VC is such that
those investors who jumped in earliest are most richly rewarded. So to assess a venture capital’s investment selection aptitude, it is
important to look at what stage they made their first investment in a company.
THE GOOD VENTURE CAPITALIST

12. 85% OF YOUR FINANCIAL SUCCESS IS DUE TO YOUR PERSONALITY AND ABILITY TO COMMUNICATE, NEGOTIATE
AND LEAD. SHOCKINGLY, ONLY 15% IS DUE TO TECHNICAL KNOWLEDGE.
CARNEGIE INSTITUTE OF TECHNOLOGY

13. > goods and services (in transactions with Governments, suppliers, customers and
colleagues);
> working conditions (holidays, leaves, time, procedures, salary raises);
> people (employees, job interviews);
> feelings (how much do you care about me?);
> affections (can you do this for me?);
> ideas (political, philosophical, etc).
EACH OF US NEGOTIATES WITH EVERYONE A BIT OF EVERYTHING:

14. WHO STARTS FROM A POSITION OF DISADVANTAGE IN A
NEGOTIATION BETWEEN STARTUPS AND VENTURE CAPITALISTS ?
QUESTION

15. !
1I S W H AT W E L LY COU L D G E T
S E PA R AT E LY WA L K I N G AWAY
F RO M T H E TA B L E
WELLY PARKER | FOUNDER WARBY PARKER

16. !
3I S W H AT C H R I S COU L D G E T
S E PA R AT E LY WA L K I N G AWAY
F RO M T H E TA B L E
CHRIS DIXON | VENTURE CAPITALIST

17. 12
12 is what Welly + Chris can create together (total value) that
is much more than what the parties can get individually (1 and 3)

18. DIVIDING THE PIE
WHAT IS THE PIE? THE PIE IS WHAT THE PARTICIPANTS ARE REALLY NEGOTIATING OVER.
IN THE PREVIOUS EXAMPLE EVERY PARTY MAY ASK 100% OF 12, BUT 100% OF 12 IS NOT REALLY QUESTIONING.
ARGUMENTS SHOULD BE USED IN NEGOTIATION.
CO-OPETITION | ADAM M. BRANDENBURGER, BARRY J. NALEBUFF
N E G O T I A T I O N

19. 12 - 3 + 1 = 8
IF WALLY WALKS AWAY FROM THE TABLE HE WILL STILL HAVE 1.
IF CHRIS WALKS AWAY FROM THE TABLE HE WILL STILL HAVE 3.
ADDED VALUE EQUALS TOTAL VALUE CREATED WITH YOU IN THE GAME, MINUS TOTAL VALUE CREATED WITHOUT YOU IN THE GAME.
THE ADDED VALUE OF 8 IS POSSIBLE ONLY IF PARTIES ARE COMPLEMENTORS. A COMPLEMENTOR IS THE OPPOSITE OF A COMPETITOR.
IF THIS IS TRUE THE PIE (8) SHUOLD BE DIVIDED 50/50: WALLY SHOULD HAVE 1 + 4 (50% OF 8) = 5, CHRIS 3 + 4 (50% OF 8) = 7.
THE PIE IS WHAT THE PARTIES COULD GET SEPARATELY VERSUS WHAT THEY CAN GET TOGETHER!

20. STARTUPPERS ARE ESSENTIAL TO HAVE A PIE, AS
ESSENTIAL IS THE VENTURE CAPITALIST
WITHOUT STARTUPPERS THERE IS NO PIE

21. AFTER ALL, ENTREPRENEURS CAN BE SUCCESSFUL WITHOUT VENTURE
CAPITALISTS, BUT THE REVERSE IS OBVIOUSLY NOT POSSIBLE.
If we look at the relationship between startup and venture capitalists is clear that

22. THE MOST SUCCESSFUL VENTURE-BACKED COMPANIES ARE THOSE WITH GREAT
ENTREPRENEURS, DISRUPTING A MARKET AT JUST THE RIGHT TIME. CLEARLY THE CAPITAL
AND CLAIMED EXPERTISE OF VCS DO NOT ON THEIR OWN CREATE A WINNING COMPANY.
You are Nothing Without My Inefficiencies!

23. I N A W O R L D D O M I N A T E D B Y N U M B E R S A N D M A T H , C H A R T S A N D G R A P H S , A C R O N Y M S A N D S H O R T H A N D , W E F O R G E T
T H A T I T I S R U N B Y P E O P L E . M O N E Y I S F U N G I B L E . P E O P L E A N D I D E A S N O T !

24. The negotiating party that has more alternatives in terms of fundraising and from which depends the return on
investment of the venture capitalist is the startupper.
HE IS, THEN, IN A REAL POSITION OF STRENGTH …

25. HOWEVER, UNDERSTANDING IF A STARTUPPER IS IN THIS POSITION
REQUIRES GREAT SELF-CRITICISM AND REALISM: BOTH SELF-CRITICISM
AND REALISM LACK IN MANY STARTUPPERS.
… AND THE POSITION OF STRENGTH INCREASES WHEN THE STARTUPPER IS IN THE SITUATION BELOW

26. (i) Shaking hands: one of the most common ways to get into a legal wrangle is
not putting agreements in writing;
(ii) Not incorporating at the right time (and when incorporating, not selecting
the right type of entity);
(iii) Not Developing Solid Template Agreements;
(iv) Not Protecting Your Valuable Intellectual Property;
(v) Not considering seriously the tax implications;
+
(vi) (it is not necessary, but when/if you decide to get it) get a lawyer who
doesn’t have the right experience.
10 5 + 1 COMMON STARTUP LEGAL MISTAKES

27. —
> Many startups companies are bearers of new commercial schemes, some even
revolutionary. Inevitably many rules and regulations will have to adapt to these
changes.
!
> The right lawyer can mean the difference between pushing the envelope and breaking
the law. The right lawyer is additional value outside of legal documents and one the best
sources of deal flow.
!
> Startup companies have a company culture that celebrates and demands risk-taking
– a quality not typically associated with lawyers. So the right startup lawyer is the one
that replace “no, because,” with “yes, if.” At a startup company speed counts, so the
mostly right answer today is better than the perfect answer tomorrow.
!
… SO, THE ANSWER TO THE RECURRING QUESTION “WHO IS THE RIGHT LEGAL COUNSEL FOR MY STARTUP?” IS MUCH SIMPLER
THAN IT SEEMS …
AIRBNB CHALLENGED LOCAL HOTEL ZONING LAWS
UBER TOOK ON TAXI LICENSING REQUIREMENTS
PINTEREST BUILT A BUSINESS AROUND POSTING COPYRIGHTED IMAGES

28. Corporate And Ip Attorney, Startup & Venture Capitalist Legal Counsel
!
Founder, partner and head of the Business, Corporate, International Trade and IP
departments of SINGULANCE
!
Author of:
(i) Il contratto in generale nell’attività negoziale. Casi questioni e tecniche
argomentative tra diritto nazionale ed internazionale
(ii) L’impresa globale. Internazionalizzazione e mercati internazionali: il diritto
degli affari e del commercio nel mondo
(iii) L’impresa innovativa. Startup e Venture Capital tra diritto e finanza: questioni
di diritto dei contratti, commerciale, societario, della proprietà intellettuale
applicate alle Startup ed al Venture Capital
!
linkedin.com/in/massimilianocaruso | singulance.com
MASSIMILIANO CARUSO

29. ACQUISITION INTERNATIONAL'S 2014 LEGAL AWARD WINNER
- BEST FOR CIVIL LAW
CORPORATE LIVEWIRE'S 2015 LEGAL AWARD WINNER - MOST
INNOVATIVE EUROPEAN LAW FIRM
ACQUISITION INTERNATIONAL'S 2015 LEGAL AWARD WINNER
- BEST LAW FIRM FOR CORPORATE
SINGULANCE
SINGULANCE.COM