Venture Deals Review Overview
February 21, 2018 | By Vela Wood
Office Hours is a podcast hosted by Vela Wood startup attorneys Kevin Vela and Aaron Terwey 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.
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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- In this episode, we discuss restriction on sales, assigning confidential information to the company, tag along rights, no-shop agreements, and indemnification clauses.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- In this episode, we discuss runaway valuations, party rounds, and board control.
- In this episode, we discuss the difference between an asset deal and stock deal, forms of consideration, earnouts, and representations & warranties.
- In this episode, we discuss when to ask for a breakup fee, conditions precedent, and extended no-shop periods.
- In this episode, we discuss what the term sheet negotiation process establishes, as well as transaction costs and reputation constraints.