|Navigation: | Home | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 ||
Venture Capital Negotiating Issues
When companies enter into negotiations with venture capital firms, there are several issues which need to be defined and agreed upon. This article describes the key issues.
Valuation. Valuation is the most prominent negotiating issues. Valuation is the price of the company in which the venture capitalist invests. Valuation determines what percent of the company the investor is buying for their capital.
Timing of the Investment. Many investors will commit a large amount of capital, but will contribute that capital to the companies in installments. Often, these installments are only made when pre-designated milestones are met.
Vesting of Founders' Stock. Like capital, investors often prefer that stock is given to company founders and key employees in installments. This is known as vesting.
Modifying the Management Team. Some investors insist that additional or substitute management employees be hired subsequent to their investment. This gives investors additional security that the company will execute on its business model. An important issue to negotiate with regards to modifying the management team is the amount of stock or options that will be issued to new management team members, as this will dilute the holdings of the founders.
Employment Agreements with Key Founders. Venture capitalists typically do not want companies to have employment agreements that limit the circumstances under which employees can be fired and/or set compensation and benefits levels that are too high. Other key employment agreement issues to be negotiated with venture capitalists include restrictions on post-employment activities and employee severance payments on termination.
Company Proprietary Rights. If the company has an important product with intellectual property (IP), investors will want to ensure that the company, and not a company employee, owns the IP. In addition, investors will want to ensure that new inventions be assigned to the company. To this end, investors may negotiate that all employees must sign Confidentiality and Inventions Assignment Agreements.
Exit Strategy. Investors are very focused on how they will "cash out" of their investment. In this regard, they will negotiate regarding registration rights (both demand and piggyback); rights to participate in any sale of stock by the founders (co-sale rights); and possibly a right to force the company to redeem their stock under certain conditions.
Lock-Up Rights. Venture capitalists may require a lock-up period at the term sheet stage. The "lock-up period" is typically a 30-60 day period where the investors have the exclusive right, but not the obligation, to make the investment. Investors typically conduct due diligence during this time without fear that other investors will pre-empt their opportunity to invest in the company.
Each of these issues are critical when raising venture capital, since the outcome can significantly impact the success of the venture and the wealth potential of the company founders and management team. Because venture capitalists are very knowledgeable regarding these issues, and have great skill in negotiating on them, companies who are raising venture capital should seek advisors who also have this experience and expertise.
Since its inception, Growthink Business Plan Development has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know.
For more information please visit http://www.growthink.com or visit our venture capital site at Growthink Venture Capital.
Defining a R&D Framework for Entrepreneurship and Innovation on Information Product Generation
IntroductionKnowledge is the key resource that forms the institutional basis of the post-industrial economy and society. It should be empasized that it is institutions of higher education that give tangible expression to this argument by acting as catalysts for knowledge and research-driven economic growth as well as well-being enhancement.
Chairman Greenspan and the FED, learn more you will be glad you did
So many people work their whole life to make money, but they know so little about out monetary system. They know so little about the Federal Reserve Bank and so very little about the brilliant minds, which make it all work.
Evaluating an Opportunity
Business opportunities are often based on broad trends, such as:? demographic, such as the "graying" of America (creating opportunities in health services, for example);? sociological developments, like the "green" movement, with its emphasis on recycling and environmental sensitivity, and;? cultural changes caused by changing economic conditions and technological developments.Opportunities can also frequently be found in current and developing business trends such as:? the globalization of business,? the need for outsourcing created by downsizing, and? the burgeoning service economy.
5 TIPS for Home-Based Business Entrepreneurs
Have you ever heard that only a small part (5%) of 'all' Home-Based Business entrepreneurs achieve success?Do an online research on your favorite Search Engineand you will understand what I mean.In this article I'm going to show you the KEY to Home-Based Business entrepreneurs success; you'll find out what makes an entrepreneur succesful in the home-based business field.
The Business Leader as Ultramarathoner
Have you ever heard of an ultramarathon? A standard marathon isjust over 26 miles. An ultramarathon is usually on the order of50 or 100 miles, though there are some that span one thousand! Imagine the endurance required to run such a race.
Entrepreneurial Business Plan The Down And Dirty Way
Does the idea of running your own business sound exciting? Do you have a business up and running and want to take it to the next level?After coaching hundreds of entrepreneurs at various stages of their evolution, I've found that the answers to these 5 questions can make or break any endeavor. Of course there are lots of other areas that must be addressed, however these will get you moving in the right direction quickly.
Why eBay Is A Smart Choice For Entrepreneurs
Attention entrepreneurs: If you think the search for the ultimate moneymaking business opportunity is like searching for a very small needle in a very big internet haystack, then think again!Perhaps you've been searching the worldwide marketplace and are both overwhelmed and frustrated by an endless stream of internet ads promising you unfathomable fortunes, each claiming that their opportunity is the answer to your prayers. Perhaps this avalanche of information is giving you an acute migraine.
Will Your Business Survive Without You?
I had a health scare in December.As it turns out, everything's perfectly okay.
10 Tips for Would-be Entrepreneurs
Every evening as the sun sets beyond the mangroves that line the shore along the western bank of Lake Myakka, Florida, herds of wild deer and wild black pigs come down to the water's edge to drink and slake their thirst.I have seen them up close and it is a beautiful, peaceful and inspiring sight!Every evening as the sun sets beyond the mangroves that line the shore a horde of hungry alligators wait just below the surface and watch for their prey.
Enterprising Route is to Go Your Own Way
DON'T talk to me about education for entrepreneurs. They're pouring far too much public money into it already - not counting the millions some well-known Scottish entrepreneurs are prepared to waste on it.
Book Yourself Solid: The Simple Selling Process
As a service provider you may not want to think of yourself as a salesperson. You are in the business of helping others and you may not feel comfortable with the sales process.
Expand Your Resourcefullness!
The success and failure for the entrepreneur is largely dictated by the ability to gain access to resources, both personal as well as those of others.So the big question is then 'how does one become more resourceful?' Like many of the skills of the entrepreneur, resourcefulness requires constant cultivation.
How To Grow Your Micro-Business
If you want to grow your micro-business (defined as a business with fewer than five employees), you mightconsider some of the findings of a survey by Statistics Canada.1.
Starting Your Business By The Book
I've gotten several questions recently about the legalities of starting a business. So, this week I thought I would address a few of the more common legal issues most new businesses face.
Youve Found Your Guru, Now What?
In my last article, "Follow That Guru", I told you about the one (1) simple technique I used when starting my home business, "A Name".Now everyone wants to know what to do next.
Walt Disneys Failures Could Inspire Entrepreneurs
You are a struggling entrepreneur and sometimes it feels like you are pushing a 3 ton boulder up a steep hill. Costs keep mounting and you are considering giving up.
From Bank Clerk to Entreprenuer
What seems like a century ago, I left school and joined a well-known High Street Bank. In those days working as a bank clerk was a well-established route for many school leavers and perceived to be a proper job with prospects.
Profile of Women Leaders
Leadership is based on two words, "pressure and support"and that the leadership is the power to influence people to move in a direction that you believe in your heart is a good direction for most people" (Fennell, 1999, p. 267).
Compensating for Your Entrepreneurial Style-or Lack of Style
I recently took an entrepreneurial quiz which evaluated my answers and informed me I would do best as a hired hand! So why am I a successful home business owner? Because I've learned to fill the holes in my entrepreneurial style, and compensate for my deficiencies. Let's start with a list of qualities that might benefit someone working for him/herself: 1.
Answering Why You, Why Now Critical in a Winning Business Plan
Business plans continue to be an essential element of the capital-raising process. They must convince investors to take notice - investors that are shrewder today due to the ups-and-downs they have experienced over the past few years.
|home | site map | contact us|