Best Venture Capital
How to raise money; What terms matter and which ones don’t; How to negotiate a fair deal for everyone; What makes venture capitalists tick, including how they are compensated and motivated; How companies are valued by venture capitalists; How all current structures of funding work, including convertible debt, crowdfunding, pre-sales and other non-traditional methods; How these particular issues change through different stages of financing (seed, early, mid and late); and How to avoid business and legal pitfalls that many entrepreneurs make. And as in the previous editions, this book isn’t just a one-sided opinion from venture capitalists, but also has helpful commentary throughout from a veteran CEO who has raised many rounds of financing from many different investors. “When I was a founder, VCs hoarded information about how venture capital terms worked to stack the deck in their favor. Along came Brad Feld and Jason Mendelson who started giving away the game by publishing how things worked on their blog. “Having worked with Brad and Jason during the Internet bubble, I witnessed first-hand the experience they gained by doing deals that covered the entire range of issues an entrepreneur faces today. The authors' frank style and incisive insight make this a must-read for high-growth company entrepreneurs, early-stage investors, and graduate students. This book goes far beyond the nuts and bolts of term sheets and venture capital to give invaluable insights into the importance of building relationships based on trust. “I have been lucky to have Brad Feld as a mentor as a VC, and watch him advise companies as a board member. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster." Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood. - Emily Mendell, Vice President of Communications, National Venture Capital Association.
Reviews
Find Best Price at Amazon"I am a 2x entrepreneur who has raised over $20M in VC funding, so when i say this is a must-read IF you want to raise money I am speaking out of experience. I wish I had this book in 2007, when I was trying to raise money. VCs are in the business to accomplish two things: (1) preserve their LP capital (i.e. don't lose money). As an entrepreneur you end up working for the VCs and will get wealthy if your company ends up being one of the 0.01% of VC companies that have very successful exits. so lets look at the main two things covered in this book that describe how VCs make money: VCs get their money from pension funds, alternative asset funds, government organizations, and basically any large sources of capital that is looking for risk-adjusted better-than-average returns. There are many other ways to raise money - loans, venture debt, private equity, and good ol' sales... Granted, this might not be the fastest way to grow your company and presents the risk of being overtaken by a well-funded company. But if you know that the market is big enough for more then one player (even if you're #2), and you want to keep a larger amount of your hard-earned money and reduce the influence of VCs then think twice about the VC option."
"This is the second time in my life I find myself doing the rounds to collect proper money from investors. The authors, seasoned VC entrepreneurs, have a gift for writing and that’s what carries you through the book. So I’m reading this and the only thing that keeps me from saying “OK, boys and girls, this covers everything, it’s the gospel” is the simple fact that if I was a VC I’d write a book that makes the case for the VC’s interests rather than the entrepreneur’s. If for some mysterious reason you don’t want a preview, on the other hand, look away now, because what follows is my summary of the key points: -------------------------------------------------------------------------------------------------------------------------. -------------------------------------------------------------------------------------------------------------------------. Chapter 1: “The Players”. • You need to be talking to a Managing Director or a General Partner. • You need a good, experienced lawyer: this is an awful place to skimp. • Mentors are great. Chapter 2: “How to Raise Money”. • You need an elevator pitch, an executive summary and a 10-slide powerpoint presentation. • “We haven’t seen a business plan in more than 20 years”. • Your financial model must get the potential expenses right; forget about nailing the revenues. • Do your homework on your VC and don’t press any clearly advertised wrong buttons. • If you feel like your VC is a proctologist, run for the hills. • Ask your VC for references from entrepreneurs. Chapter 3: “Overview of the Term Sheet: • It’s not a letter of intent; it’s a blueprint for your future relationship with your VC. • Two things matter: economics and control. Chapter 4: “Economic Terms of the Term Sheet”. • Understand the difference between pre-money and post-money. • The VC will try to stick the options pool in the pre-money valuation. • You must have a Plan B to be able to negotiate good economic terms. • Competition aside, valuation will depend on the stage of the company, the team’s experience, the numbers, the suitability for the VC and the economic environment. • Liquidation Preference arises because VCs come in with preferred stock and means the VC gets its money first. • Fully Participating stock receives its participation amount and then shares in the liquidation process on an as-converted basis. • A cap can be put on the participation. • Under “pay to play” provisions, investors who do not participate in the next round get converted to common stock. • Typically, employee stocks and options will vest over four years and disappear if somebody leaves. • Consideration must be given to treating the vesting as clawback with an IRS Section 83(b) election. • Acceleration of vesting upon change of control is a key feature, don’t leave it out! • Antidilution provisions may be requested by the investor for the case where new common stock is created after the financing. Chapter 5: “Control Terms of the Term Sheet”. • At the beginning it will be 1. 2nd VC, 5. outside board member. • Don’t allow observers on your board. • Make sure the Protective Provisions allow you to borrow a reasonable amount of money. • Your investors need to vote as a single class. • There will be a drag-along provision (majority of shares on as-converted basis is the law in Delaware). • There will be a conversion clause (so VCs can vote alongside common stock when they must). • An automatic conversion clause can be there to force VCs to give up on their preferred ahead of a sale. Chapter 6: “Other Terms of the Term Sheet”. • Dividends might be requested by dorky VCs with Private Equity background. Chapter 8: “Convertible Debt”. • Convertible converts at a discount to the next financing. • You should put a reasonable time horizon on an equity financing as a condition, or you will find the debt converted before you had time to do the financing. • Follow-on investments can still be made during the investment term of the fund. • If a fund is approaching the end of its life, you don’t want them to invest in you and most probably they can’t anyway. Chapter 10: “Negotiation Tactics”. • Get a good result, do not kill your personal relationships and understand the deal you struck. Chapter 11: “Raising Money the Right Way”. • Don’t ask for an NDA. • Don’t negotiate your deal at the beginning (that looks awful) but don’t leave it last either."
Get the inside scoop on what venture capitalists want to see in your startup Venture Deals provides entrepreneurs and startup owners with a definitive reference for understanding venture capital funding. Understand how venture capital funds work, and how investors decide to invest Learn effective negotiation tactics based on game theory Delve into the meanings behind the term sheet's economic and control issues Avoid common issues that sink deals at the seed, early, mid- and late stages. "When I was a founder, VCs hoarded information about how venture capital terms worked to stack the deck in their favor. - Bill Aulet, Managing Director, Martin Trust Center for MIT Entrepreneurship "Having worked with Brad and Jason during the Internet bubble, I witnessed first-hand the experience they gained by doing deals that covered the entire range of issues an entrepreneur faces today. - Heidi Roizen, Operating Partner, DFJ "Feld and Mendelson pack a graduate-level course into this energetic and accessible book. The authors' frank style and incisive insight make this a must-read for high-growth company entrepreneurs, early-stage investors, and graduate students. This book goes far beyond the nuts and bolts of term sheets and venture capital to give invaluable insights into the importance of building relationships based on trust. - Jeff Harbach, President and CEO, Kauffman Fellows "I have been lucky to have Brad Feld as a mentor as a VC, and watch him advise companies as a board member. - Tony Conrad, founder / CEO, About.me and Partner, True Ventures "Even if your lawyer or VC has done a lot of deals, you should read this book. - Lesa Mitchell, Managing Director, Techstars Kansas City "My biggest nightmare is taking advantage of an entrepreneur without even realizing it. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster." Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood. Now you can have all this information provided in an easy and concise format that evens the playing field.”. - Mark Suster , General Partner, Upfront Ventures. “Having worked with Brad and Jason during the Internet bubble, I witnessed first-hand the experience they gained by doing deals that covered the entire range of issues an entrepreneur faces today. This book goes far beyond the nuts and bolts of term sheets and venture capital to give invaluable insights into the importance of building relationships based on trust. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster." Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood.
Reviews
Find Best Price at Amazon"I am a 2x entrepreneur who has raised over $20M in VC funding, so when i say this is a must-read IF you want to raise money I am speaking out of experience. I wish I had this book in 2007, when I was trying to raise money. VCs are in the business to accomplish two things: (1) preserve their LP capital (i.e. don't lose money). As an entrepreneur you end up working for the VCs and will get wealthy if your company ends up being one of the 0.01% of VC companies that have very successful exits. so lets look at the main two things covered in this book that describe how VCs make money: VCs get their money from pension funds, alternative asset funds, government organizations, and basically any large sources of capital that is looking for risk-adjusted better-than-average returns. There are many other ways to raise money - loans, venture debt, private equity, and good ol' sales... Granted, this might not be the fastest way to grow your company and presents the risk of being overtaken by a well-funded company. But if you know that the market is big enough for more then one player (even if you're #2), and you want to keep a larger amount of your hard-earned money and reduce the influence of VCs then think twice about the VC option."
"This is the second time in my life I find myself doing the rounds to collect proper money from investors. The authors, seasoned VC entrepreneurs, have a gift for writing and that’s what carries you through the book. So I’m reading this and the only thing that keeps me from saying “OK, boys and girls, this covers everything, it’s the gospel” is the simple fact that if I was a VC I’d write a book that makes the case for the VC’s interests rather than the entrepreneur’s. If for some mysterious reason you don’t want a preview, on the other hand, look away now, because what follows is my summary of the key points: -------------------------------------------------------------------------------------------------------------------------. -------------------------------------------------------------------------------------------------------------------------. Chapter 1: “The Players”. • You need to be talking to a Managing Director or a General Partner. • You need a good, experienced lawyer: this is an awful place to skimp. • Mentors are great. Chapter 2: “How to Raise Money”. • You need an elevator pitch, an executive summary and a 10-slide powerpoint presentation. • “We haven’t seen a business plan in more than 20 years”. • Your financial model must get the potential expenses right; forget about nailing the revenues. • Do your homework on your VC and don’t press any clearly advertised wrong buttons. • If you feel like your VC is a proctologist, run for the hills. • Ask your VC for references from entrepreneurs. Chapter 3: “Overview of the Term Sheet: • It’s not a letter of intent; it’s a blueprint for your future relationship with your VC. • Two things matter: economics and control. Chapter 4: “Economic Terms of the Term Sheet”. • Understand the difference between pre-money and post-money. • The VC will try to stick the options pool in the pre-money valuation. • You must have a Plan B to be able to negotiate good economic terms. • Competition aside, valuation will depend on the stage of the company, the team’s experience, the numbers, the suitability for the VC and the economic environment. • Liquidation Preference arises because VCs come in with preferred stock and means the VC gets its money first. • Fully Participating stock receives its participation amount and then shares in the liquidation process on an as-converted basis. • A cap can be put on the participation. • Under “pay to play” provisions, investors who do not participate in the next round get converted to common stock. • Typically, employee stocks and options will vest over four years and disappear if somebody leaves. • Consideration must be given to treating the vesting as clawback with an IRS Section 83(b) election. • Acceleration of vesting upon change of control is a key feature, don’t leave it out! • Antidilution provisions may be requested by the investor for the case where new common stock is created after the financing. Chapter 5: “Control Terms of the Term Sheet”. • At the beginning it will be 1. 2nd VC, 5. outside board member. • Don’t allow observers on your board. • Make sure the Protective Provisions allow you to borrow a reasonable amount of money. • Your investors need to vote as a single class. • There will be a drag-along provision (majority of shares on as-converted basis is the law in Delaware). • There will be a conversion clause (so VCs can vote alongside common stock when they must). • An automatic conversion clause can be there to force VCs to give up on their preferred ahead of a sale. Chapter 6: “Other Terms of the Term Sheet”. • Dividends might be requested by dorky VCs with Private Equity background. Chapter 8: “Convertible Debt”. • Convertible converts at a discount to the next financing. • You should put a reasonable time horizon on an equity financing as a condition, or you will find the debt converted before you had time to do the financing. • Follow-on investments can still be made during the investment term of the fund. • If a fund is approaching the end of its life, you don’t want them to invest in you and most probably they can’t anyway. Chapter 10: “Negotiation Tactics”. • Get a good result, do not kill your personal relationships and understand the deal you struck. Chapter 11: “Raising Money the Right Way”. • Don’t ask for an NDA. • Don’t negotiate your deal at the beginning (that looks awful) but don’t leave it last either."
Over the past twenty-five years, Jason Calacanis has made a fortune investing in creators, spotting and helping build and fund a number of successful technology startups—investments that have earned him tens of millions of dollars. Now, in this enlightening guide that is sure to become the bible for twenty-first century investors, Calacanis takes potential angels step-by-step through his proven method of creating massive wealth: startups. You just picked up this book and you’re wondering if spending a few bucks on these 288 pages could change your life and make you rich beyond your wildest dreams. I hope you will have the audacity to buy this book, read it every year for the next five, make fifty outrageous bets in tech startups, and hit one that goes one hundred or five hundred or even five thousand times your initial investment.
Reviews
Find Best Price at Amazon"Easy to follow steps and great advice throughout for both investors and entrepreneurs."
"That's the only way I can describe my approach to this fantastic read by Jason Calacanis."
"But here’s the key issue with the book: Calacanis wrote Angel to advise individuals how to invest their own capital as angel investors. His rule of thumb is to deploy up to 10% of your net worth in angel investment (despite stating on his Angellist syndicate page that “angel investing should never be more than 1% of your total portfolio/net worth"), and he writes that you need to invest in at least 50 startups to receive outsize returns. Given that many startups have minimum investment thresholds, you’ll likely need at least $20k per startup, which entails $1 million+ for 50 companies, requiring a $10 million net worth for this $1 million invested."
"But this isn't enough to outweigh the negatives of this book. If you're even a casual observer of how Sequoia communicates to the outside world, you'll immediately recognize the same building blocks - just check out Doug Leone's bio on their website or look up their famous pitch checklist. Additionally, as other reviewers have pointed out, the book seems most appropriate for someone who already has a net worth of eight figures and above - which is not yours truly. He's ticked off that "dopey people" get board seats at high profile firms but he, clearly the more deserving one, hasn't been asked to join a high profile board yet. Bottom line: I have a nagging feeling that this book was written because Jason wanted to add another line to his LinkedIn profile / a few more words to his Twitter bio."
Best Valuation
A timely update to the global best-selling book on investment banking and valuation. In the constantly evolving world of finance, a solid technical foundation is an essential tool for success. Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions, Second Edition is a highly accessible and authoritative book that focuses on the primary valuation methodologies currently used on Wall Street--comparable companies, precedent transactions, DCF, and LBO analysis--as well as M&A analysis. In codifying the art and science of investment banking, the authors convert this oral history into an accessible framework by bridging the theoretical to the practical with user-friendly, step-by-step approaches to performing primary valuation methodologies.” –Joseph R. Perella, Chairman and CEO, Perella Weinberg Partners. "Investment Banking provides a highly practical and relevant guide to the valuation analysis at the core of investment banking, private equity, and corporate finance. "This book will surely become an indispensable guide to the art of buyout and M&A valuation, for the experienced investment practitioner as well as for the non-professional seeking to learn the mysteries of valuation." Rosenbaum and Pearl have created a comprehensive and thoughtfully written guide covering the core skills of the successful investment professional with particular emphasis on valuation analysis." Investment Banking provides specific step-by-step valuation procedures for LBO and M&A transactions, with lots of diagrams and numerical examples."
Reviews
Find Best Price at Amazon"This is a very good book for professionals working in the different areas of Corporate Bankin."
"It is my pleasure to recommend 'Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions', which is easily one of the best and most practical books on M&A and valuation that I've read."
"This is more informative than many longer investment banking books I've owned and it's much more accessible and lays in the information out in a more practical manner than lighter investment banking books that I've owned."
"Actually, this is the only book I found, which is practical oriented and allows the reader to gain practical oriented experience while using the book as a tool to work through Valuation, LBOs, and M&As."
"Great product, great book."
"It even includes a sample LBO model which is well constructed and will give some insights not only into Excel, but also into the economics of an LBO."
"This provides detailed explanation on the process of investment banking and valuation methods including examples."
"I bought this book after the authors of this book, Rosenbaum and Pearl, presented at a finance summit at Rutgers Business School."
Best Private Equity
The definitive guide to private equity for investors and finance professionals. From deal sourcing to exit, LBOs to responsible investing, operational value creation to risk management, the book systematically distills the essence of private equity into core concepts throughout the private equity life cycle. A clear and concise reference for the industry expert A step-by-step guide for students and casual observers of the industry A theoretical companion to the INSEAD case book Private Equity in Action: Case Studies from Developed and Emerging Markets. It shows the potential the asset class has for building better and stronger companies and thereby acting as a force for good for the economy overall."
Reviews
Find Best Price at Amazon"Well written and excellent book that delves into the world of private equity on a level that beginners as well as seasoned veterans of private equity can understand."
"A very balanced, comprehensive book - theory and practical - about everything important to know and beyond in private equity."
"Read it first quickly then deeply with the companion book “private equity in action”, you are like attending a great course and become versatile in many aspects of private equity."
"This is a great read for those wanting a comprehensive overview of how private equity works, from doing deals, to post-money value creation, to fund raising, to LP strategies, etc."
"Mastering Private Equity accurately sets out private equity as it is actually done including commentary from market professionals."
"I have recently started reading “Mastering Private Equity” and think it provides an excellent overview of some core concepts in the industry."
"It covers both high level and in-depth concepts very clearly and concisely with references to cases and real-life examples that are very helpful in diving deep."
"It explains step by the step the process of PE investments from a PE house perspective as well as from a bought company perspective (or management team)."