Tuesday, November 13, 2007

7 Things You Should Know About Venture Capital

Montreal bloggger, marketing guru and tech entrepreneur Ben Yoskovitz posted a great article yesterday on 7 Things No One Ever Tells You About Raising Venture Capital Financing.

Ben's 7 Things:

* Signing a term sheet is only step one. Now the real work begins!
* Don't try to negotiate all the fine points of the deal at the term-sheet stage. "The term sheet is a letter of intent to invest, not a binding or absolute contract."
* For most entrepreneurs, "Due Diligence" is a completely foreign concept and a frustrating experience.
* The paperwork is extremely detailed and extensive. And heavy.
* Most of the final deal focuses on negative details. "Everyone’s excited and eager to turn the business into a success, but here you are negotiating what to do when the s--t hits the fan."
* You pay all the legal bills.
* Don’t focus only on how much you’re raising and what chunk of the company you’re giving up. There are other key issues to work on, such as the composition of the new board of directors.

Read the whole post here. There are lots more details worth reading, and good links to follow. Thanks for posting, Ben!And good luck with your journey.

(An eighth point might have been that a lot of deals fall apart even after the term sheet is signed.)


Ben Yoskovitz said...

Rick - Thank you for linking to my post, I appreciate it!

With regards to your 8th point, it's particularly interesting, and one I should have included, except my impression was that it's quite RARE for deals to fall through after a term sheet is signed. Is that really NOT the case?

Rick said...

My understandng is that it's about 10%. So failure may not be common, but neither is it rare.