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Wen's Idea: Mastering VC Negotiations: A Visual Guide for Startup Founders

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First Time for You. Not the First Time for Them 🤝

This is how you master VC Negotiations. 👇


Congratulations!

You’ve found a VC that wants to invest in your startup.


They send you the term sheet.


It is good? Bad? Standard?


You must understand common term sheet terms such as:

🔹 Valuation

🔹 Liquidation preference

🔹 Voting rights

🔹 Anti-dilution provisions

🔹 Board composition


A term sheet is great:

🌟 Now you can go back to other firms and tell them you have a Term Sheet (leverage the leverage).


Of course, there will be changes you want to make to it.


Some negotiators advise conducting ALL the term sheet changes you want to see and sending it back.


I’d take this with a grain of salt especially if you don’t have a BATNA (Best Alternative to the Negotiated Agreement).


Once you make the changes you deem necessary you send it back:

💬 “We are prepared to accept the deal as we red-lined it” – this signals the end of negotiations.


Note that being too aggressive with your asks may turn some investors off.


Negotiate in writing to give yourself time to consult lawyers and field experts.


Hope the flowchart provides some guidance.


What is the best negotiating advice you were given? I am curious to know.



Source: Alex Iskold


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