Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Category: Finance
Author: Brad Feld, Jason Mendelson
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This Month Reddit 6


by hell_0n_wheel   2019-07-21

> Depends on the stage of the startup though, I'd agree that when you're pushing 50-100 employees

The value of a startup isn't determined by the number of employees. The value is an agreed-upon (and rather arbitrary) number on the term sheet generated during the startup's most recent round of financing.

Furthermore, that valuation doesn't have anything to do with your equity as an employee. That's a different set of numbers that the board & investors agree upon, and that number changes with each new round of financing. Which is to say, whatever equity you get when joining a company, will get diluted over time as more financing comes in. Unless you're getting a good amount of cash compensation, it actually pays less and less to stay at a startup with a fixed amount of equity.

The CEO of my last startup gave this book to every employee so we could understand what the hell was going on, and it does a great job of explaining how startups work. Suggest you read it:

by Chemical_Suit   2019-07-21

Not exactly but recommend reading:

by tschellenbach   2018-09-22
I wonder how well they explain to their employees how this can wipe out their upside. Venture Deals by Brad Feld is a great read to help understand why this is potentially a dangerous situation to be in:
by x0x0   2018-07-26
We're in a similar place -- finished our first priced round.


Blatant unfairness: yes, warm intros are required. Yes, this is unfair. However, the onus is on you to make this happen. If you want to found a startup, put your time in to building your network. If you're at a startup now, get intros to the VCs. Ask to go to VC meetings.

When you're building the network of people you're going to ask for angel cash, do the same. Lots of them will be happy to give you those warm intros. So start now building a network of people you can ask for $10-$25k. This wasn't obvious to me, but an intro to a vc from an angel who has invested counts as a great intro.

The same network will get you into one of the good lawyers (cooley, sonsini, gunderson) with a warm intro who will also do a deferred fee deal for $15-$25k. You want this.

The other thing that is unfair is, at least in b2b, the more customers you have the easier a raise will be. How do you get those first customers when you have nothing except a site that breaks all the time and a tiny team? That's your problem; make it happen.

Passionate origin story: we build a b2b tech. Most VCs seemed happy with

1 - we understood this problem from working on/near it

2 - we're building a solution

Oh, and read the book _venture deals_ by brad feld and jason mendelson [1]. Seriously. It's extraordinarily valuable.

Seriously consider doing the YC pre-YC program. It's all funnel for YC, but the info is good. Though it can be summed up (only somewhat facetiously) as, "Have you talked to customers yet? Maybe you should talk to customers. If you've talked to customers, talk to more! If you've talked to more customers, talk to even more! And after that... talk to some customers!"

Understand that the seed and A all want 25%; plan accordingly. Within that range, they are less price sensitive.

If you have questions, I'm happy to answer them, but I'm busy (the startup experience is everyone in your life is grumpy at you for flaking on them) so no promises on response time.


by loopbit   2017-08-19
Perhaps not exactly what you are looking for, but a very good read on the subject is "Venture Deals" (

If you want to know exactly what rights your shares have (and don't have), this is the book.

by dmourati   2017-08-19
Rookie mistake. Read Venture Deals:
by dangoldin   2017-08-19
Not sure if you meant a book on the web but I liked Venture Deals -