Venture Deals: 8 key ideas
The core ideas of Venture Deals, each in under a minute, written in our own words. Want the full depth? Get the book.
- IDEA 1 OF 8
Know the players in a deal
Feld and Mendelson describe the people involved in raising venture money, from founders and lawyers to angel investors and venture capitalists.
Understanding each party's interests helps founders negotiate sensibly. Lawyers with startup experience help greatly.
- IDEA 2 OF 8
The term sheet sets the rules
The authors explain that a term sheet outlines the main terms of an investment before final documents are drafted.
Most later negotiations follow what is agreed at this stage. It deserves careful attention from founders.
- IDEA 3 OF 8
Two things really matter
Feld and Mendelson argue that the important terms fall into two groups: economics and control.
Economics decides who gets what money, while control decides who makes key decisions. Most other terms matter far less.
- IDEA 4 OF 8
Valuation is only part of price
The authors explain that a company's valuation interacts with other terms, such as the size of the employee option pool.
A high headline valuation can hide less favourable conditions. Founders should look at the whole package.
- IDEA 5 OF 8
Liquidation preferences protect investors
The book explains how liquidation preferences decide who gets paid first when a company is sold.
These terms can greatly change how sale proceeds are divided. Founders often overlook them at first.
- IDEA 6 OF 8
Control terms shape decisions
The authors describe board seats, protective provisions and voting rights.
These terms give investors a say in major decisions, such as selling the company or raising more money. Founders should know exactly what they give up.
- IDEA 7 OF 8
Understand how funds work
Feld and Mendelson explain how venture funds raise money, earn fees and seek returns.
Knowing investors' incentives helps founders understand their behaviour during deals. Funds have their own deadlines, pressures and goals.
- IDEA 8 OF 8
Negotiate with respect
The authors advise founders to prepare well, understand what matters most and avoid winning small points at the cost of trust.
Investors and founders will work together for years. Relationships outlast any single negotiation.
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