Venture Deals

Venture Deals by Brad Feld and Jason Mendelson is a great entry point for anyone starting into the VC world of startups, exits and acquisitions. The term sheet is used to define the book’s flow and structure, and in the process this fundamentally important document is demystified. Along the way, the authors have plenty of opportunity to inject helpful advice for the budding startup founder.

The main message is clear. Despite the complexity and length of the average term sheet, it all boils down to two things: economics and control. Much of the book focuses on explaining how these two concepts are expressed and negotiated.

We also get a good grounding of the main players: the entrepreneur, the VC (and the various characters in the firm), angel investors, mentors, lawyers and so on. Plus, of course, a good roadmap for the various processes: fund raising at various stages, how VC funds work, and (importantly) how the money gets shared out at “exit”.

All the main economic concepts are well explained. Key “gotchas” are clearly pointed out, such as the difference between valuation as premoney or postmoney, or the implications of the size of the option pool on premoney valuation, or how warrants can be a part of the negotiation. There is good coverage of liquidation preferences and how they work.

The section on control, picking board members, and what protective provisions mean is equally concise and clear.

The book concludes, as you’d expect, with a section on Letters of Intent. Examples of a term sheet and an LOI are included as appendices.

The jacket of the book suggests, after reading it, you may "be smarter than your lawyer and venture capitalist". I’m not sure that’s likely. But overall, I think it is a great overview of the subject matter, and one I sometimes return to for a refresher. I don’t think the book will make anyone an expert overnight, but enough of the basics are covered that you’ll understand the conversation.