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How to Negotiate a Term Sheet with a VC
Based on the financings I’ve seen and worked on – both as a VC and as an entrepreneur – my Top 10 biggest takeaways for entrepreneurs are as follows (not in any particular order):
- Get a good lawyer
- Focus on terms that matter, otherwise known as Pick your battles
- Always have a BATNA (Best Alternative to a Negotiated Agreement a fancy way of saying Plan B)
- Be prepared to pay up for high quality investors
- Ask for references
- Don’t let the VC get away with negotiating a point by saying “we always do it this way
- If you have multiple investors in the syndicate, insist on a single investor counsel and a lead investor
- Try do deal in advance with follow-on financings
- Handle the term sheet negotiation carefully
- Finally don’t forget to say thank you at the end of the process
Matt goes into much more detail in his post.
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