Venture Capital Deal Terms: A guide to negotiating and structuring venture capital transactions

by Harm De Vries, Menno Van Loon, Sjoerd Mol

So you’re (about to be) involved in a Venture Capital deal. How do you ensure you end up with the best possible deal? You need to know what you’re talking about. Not just on a basic level. On every level. You need to understand the ins and outs of the deal. What are your options? How exactly can they impact you, now as well as in the future? What are the people on the “other side of the table” aiming for? What are the pitfalls? Only if you truly understand the deal, will you be able to come to the best possible deal. And to truly understand the deal, you need to understand the deal from the perspective of both the investor and the entrepreneur. This new book of VC investor Harm de Vries and VC lawyers Menno van Loon and Sjoerd Mol, provides an in-depth practical look into venture capital deals. Together, the authors have been involved in hundreds of VC deals. Their expertise covers both the investor’s perspective and the entrepreneur’s perspective. The book shows you how deal terms work out in practice and explains the economics behind the deal terms. And - crucially - it does so both from the point of view of the entrepreneur as well as that of the investor. The book starts with an introduction of the investment process in general and the different stages of financing. Next, the book introduces a case study of a Series A financing of a startup. A Series A term sheet is used as the basis for the discussion of the different clauses used in venture capital transactions. Each subsequent chapter discusses a certain type of clause in the term sheet (e.g. milestone investments, liquidation preference, anti-dilution protection, and drag along). These chapters also include a standard (and, if applicable, alternative) version(s) of the relevant clause. The book includes many examples, as well as negotiation tips for both entrepreneurs and investors. The result is an extremely practical guide to venture capital deals, which will be invaluable to anyone involved in venture capital transactions - investors, entrepreneurs and advisors. For more information on this book and its authors, please see the book’s www.venturecapitaldealterms.com. The special VC Term Sheet Template contained in the book can be downloaded (for free) from the aforementioned website.

Genres: Business, Finance, Nonfiction

194 pages, Kindle Edition

Published January 24, 2017

Reviews

[Quinten Selhorst · Rating 3 out of 5]

A nice and readable guide to negotiating and structuring fundraising transactions.

Compared to “Venture Deals” from Brad Feld and Jason Mendelson, this book doesn’t have the same finesse and rigorousness in terms of deal term tactics. However, I do believe that the books complement each other enough such that I would recommend other entrepreneurs to read both.

Furthermore, as the authors of the book are all Dutch, the book is leaning in a bit more towards the “Dutch/Rhineland perspective” regarding deal terms, compared to Venture Deals which is written from a more Anglo-Saxon perspective.

[Philip van den Heuvel · Rating 3 out of 5]

This books provides a very comprehensive overview of the terms contained in a Venture Capital transaction. It is however a bit too dry by covering all the common terms with some options one by one. Especially with some of the more important terms for negotiation, more context could be given also by possible negation strategies.

It is however nice to have a more Dutch/European view on term deals while also naming the differences with US and between several jurisdictions compared to books like "Venture Deals".

[Evatt Dixon · Rating 5 out of 5]

This is a solid book and I like it a lot. It is very straight to the point, and its awesome conciseness is in sharp contrast with the other famous book in the area, the Venture Deals. Venture Deals adopts a more colloquial style of writing, which may have made it more approachable for new readers. I read Venture Deals before this one, and I believe Venture Deals offered me a good general understanding in this area, which probably enabled me to have a smooth reading journey of this Deal Terms. I think this Deal Terms book is very useful in consolidate and solidify the knowledge in this area. Thanks to its refreshing conciseness, it will also function very well as a reference book.

[Robert Jan · Rating 3 out of 5]

Probably the most boring book I've read on VC, yet I would recommend it to anyone active in the industry, especially first time founders.

[Tanner Nelson]

This books introduces common terms one would encounter during venture capital funding rounds as an investor or a founder of a company. I was asked to read this book as part of my job, but I found it to be pretty interesting. I won’t rate it because it’s more of an educational book rather than a book that merits a score, but it’s definitely worth a read if you’re in the venture capital world.

[Brian · Rating 4 out of 5]

A straightforward description of the contents of a term sheet and the various options available to each party, with a good indication of standard practice. While Feld and Mendelsohn covered the same topic in more detail, this book is perhaps a little clearer on some topics.

[Brian]

Straightforward description of the contents of a term sheet and the options that are available to each parties. I think the Feld and Mendelsohn book on the same topic was more in depth, but this covers most areas effectively.