Inc has a solid piece on terms to be careful of when raising venture capital. I spent some time on the phone with Darren Dahl, the journalist who wrote the piece, and he did a very good job getting his arms around some of the most important issues I’ve seen entrepreneurs trip over. Raising a venture round is very difficult and confusing terms are one area where VCs have a distinct edge over entrepreneurs. This Inc article is a good resource for founders trying to understand the terms presented to you by a VC.
A good venture capitalist will walk you through the terms after he/she has presented you with a term sheet. You should ask for this if it is not offered to you after you get a term sheet. You should prep with your lawyer prior to this and ask a lot of questions of the VC as they go through the terms with you.
And, while they are really expensive, get a good lawyer for your fund raise!
March 3rd, 2010 at 11:33 pm
I agree — a nice piece on some practical things to look out for. I think a similar piece on angel/seed issues to be wary of (or at least to think about) might be a good idea.
Hope all is well.
Dave
March 18th, 2010 at 2:25 pm
This was a tremendous article. I am in the process of looking for seed capital and while I will be working with an SEC attorney along the way this article was a great first step. By the way, who is Darren Dahl?
Thanks!
March 18th, 2010 at 3:10 pm
Good luck with your fund raise. Darren is the journalist who wrote the Inc article.