Venture Deals Review Overview

Office Hours is our podcast covering general issues related to small businesses and startups. Venture Deals Review is a series of Office Hours episodes discussing the book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson.

You can listen on Apple Podcasts or click the links below to see the show notes for each episode.

VDR Ch.16: Legal Things Every Entrepreneur Should Know (We recommend listening to VDR Ch. 16 first, before VDR Ch.1)

  • In this episode, we discuss wage claims, entity types, accredited v. non-accredited investors, 83(b) elections, and 409A valuations.

VDR Ch. 1: The Players

  • In this episode, we discuss the non-monetary value your VC should provide, issues with Friends and Family financing, how the angel investor ecosystem has evolved, and how paying advisors success fees can violate SEC laws.

VDR Ch. 2: How to Raise Money

  • In this episode, we discuss how to determine how much money to raise, how to prepare a pitch deck, whether or not you need a PPM, four key roles of a lead investor, and first practical steps after deciding to raise money.

VDR Ch. 3: Overview of the Term Sheet

  • In this episode, we discuss who is responsible for providing the term sheet, which parts of a term sheet are binding, the different types of term sheets, and what should be included in a term sheet.

VDR Ch. 4, Part 1: Economic Terms of the Term Sheet

  • In this episode, we discuss why the difference between pre-money valuation and post-money valuation matters when negotiating with a VC, why price per share is critical in later financing docs, what is included in a fully-diluted basis, why accepting a lower valuation can be the best option, the difference between participating preferred stock and non-participating preferred stock, and why play-to-pay scenarios are no longer common.

VDR Ch. 4, Part 2: Economic Terms of the Term Sheet

  • In this episode, we discuss why venture-backed startups must vest their equity, why you shouldn’t give employees Restricted Stock Purchase Agreements, how to get VCs to agree to a smaller option pool, and the difference between full ratchet anti-dilution and weighted-average anti-dilution.

VDR Ch. 5: Control Terms of the Term Sheet

  • In this episode, we discuss which activities a company’s board of directors must approve, how long a company should keep control of its board, the difference between a board member and board observer, and negotiating a threshold for protective provisions.

VDR Ch. 6, Part 1: Other Terms of the Term Sheet

  • In this episode, we discuss the difference between compounding and non-compounding dividends, why VCs ask for redemption rights, when conditions precedent matter, what’s included in information rights, and suggested thresholds for registration rights and ROFO.

VDR Ch. 6, Part 2: Other Terms of the Term Sheet

  • In this episode, we discuss restriction on sales, assigning confidential information to the company, tag along rights, no-shop agreements, and indemnification clauses.

VDR Ch. 7: The Cap Table

  • In this episode, we discuss best uses of cap tables, online cap table management platforms, and how VCs and companies each approach calculating price per share.

VDR Ch. 8: Convertible Debt

  • In this episode, we discuss the pros and cons of using convertible debt from both an investor and company perspective, the three different scenarios that will cause a conversion, and when you should and shouldn’t use KISS or SAFE agreements.

VDR Ch. 9: Crowdfunding

  • In this episode, we discuss product, charity, and equity crowdfunding, company types that best fit crowdfunding, the importance of being familiar with securities regulations and exemptions, and the future of crowdfunding.

VDR Ch. 10: How Venture Capital Funds Work

  • In this episode, we discuss typical management fees and carried interest structures, clawback provisions, the difference between capital calls and blind pools, and the difference between corporate VC arms and strategic investors.

VDR Ch. 11: Negotiation Tactics

  • In this episode, we discuss the role of your lawyer in a term sheet negotiation, when and how to walk away from a deal, and the best ways to prepare for a negotiation.

VDR Ch. 12: Raising Money The Right Way

  • In this episode, we discuss what your venture attorney’s role is – and isn’t – in raising money, expectations for your Friends and Family Round, and best practices when emailing potential investors.

VDR Ch. 13: Issues At Different Financing Stages

  • In this episode, we discuss runaway valuations, party rounds, and board control.

VDR Ch. 14, Part 1: Letters Of Intent – The Other Term Sheet

  • In this episode, we discuss the difference between an asset deal and stock deal, forms of consideration, earnouts, and representations & warranties.

VDR Ch. 14, Part 2: Letters Of Intent

  • In this episode, we discuss when to ask for a breakup fee, conditions precedent, and extended no-shop periods.

VDR Ch. 15: Why Do Term Sheets Even Exist?

  • In this episode, we discuss what the term sheet negotiation process establishes, as well as transaction costs and reputation constraints.