If you are an entrepreneur and want to understand how smart VCs are in terms of financial wheeling and dealing, read this summary of the Intermix Media deal by VC Bill Birnhaum.
Like many entrepreneurs, you’re probably either great at technology or
marketing, but you leave the finance stuff to others. This can be a
costly mistake. Invest a lot of time talking to investors and
entrepreneurs to get an idea for what kind of deals and terms are out
there. If you don’t take the time to understand cap tables and term
sheets, trust me, you may be in for a wild ride, and you won’t be in
the driver’s seat. It can get painful.
Recently I loaned three books, including Term Sheets and Valuations (a
must read!), to a local entrepreneur who was raising a couple of
million dollars. He was very thankful. I told another entepreneur he
had to visit with Kent Thomas of CFO Solutions before accepting a term
sheet. He did, and they pushed back on a lot of terms and got a much
Most of us make big mistakes the first time around, whether dealing
with angel investors or VCs. It’s complicated stuff and not as
interesting as creating products and markets. But it’s essential to get
good advice on these issues. Find some trusted advisors who have your
best interest at heart.