Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist
by Brad Feld
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Recommendations on Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Recommendations from domain experts (curated by Highlyreco)

Steve Blank's Review:

If you buy one book to understand how VC’s and fund raising works, Venture Deals is the one. Wish I had it when I did startups. Same for Mastering the VC Game. If you read two books about how to deal with VC’s start here

Ref: https://steveblank.com/books-for-startups/

Marc Andreessen's Review:

1/Third aspect of valuation of tech companies often misunderstood--this time private valuations set by VCs and other private investors:

2/This topic was recently explored by @Jessicalessin in this excellent article: https://www.theinformation.com/When-3-Billion-is-Not-3-Billion

3/A private company in which a sophisticated investor has bought a minority stake for $X/share is not actually worth $X * total # of shares.

4/First, the entire company has not traded hands, just a small slice of it. So we don't actually know what the whole company is worth.

5/Second, most financing rounds are for preferred shares, which have special rights. Other shares don't have those rights & are worth less.

6/Smart VCs think about startup shares less as stock than as options -- options with limited (1x) downside & unlimited (1,000x+) upside.

7/A share of preferred startup stock ~= A long-dated out-of-the-money call option, paired with a long-dated contingent put option.

8/The contingent put option is the liquidation preference in preferred stock. Increases odds of getting $ back in a downside sale of the co.

9/Plus, in some high-valuation late-stage rounds, there are additional downside protections like ratchets, which can be highly valuable.

10/And, preferred stock brings with it governance rights and information access not available to normal investors. Those have value too.

11/So you can't extrapolate the value of an entire company from a minority sale of preferred stock. Better just to focus on cash raised.

12/In my view there is WAY too much discussion of private valuations in tech. Fuzzy numbers matter way less than real company substance.

13/The best book to read as followup to this tweetstream is: Venture deals

ref: https://twitter.com/pmarca/status/457021383109668864

what book would you suggest for a founder to gain a better understanding of overall finance?

For venture finance, I'd say Brad Fed's book on venture deals and Andrew Metrick's venture capital textbook.

Ref: https://twitter.com/pmarca/status/588527284010684416

what book would you suggest for a founder to gain a better understanding of overall finance?

For venture finance, I'd say Brad Fed's book on venture deals and Andrew Metrick's venture capital textbook.

Ref: https://twitter.com/pmarca/status/588527284010684416

Danielle Morrill's Review:

Brad Feld is such a boss. He undeniably marches to the beat of his own drum when it comes to his investing style and general startup advice. Which is exactly why his book, Venture Deals, is so worth reading. He wrote this with his Foundry Group cofounder Jason Mendelson, and the result is a captivating read about how venture capital deals come together.

Essentially, the aim of this book is to help you be smarter than your lawyer or venture capitalist when it comes to deal structuring so you don’t get screwed. If you’re looking to raise money for your startup any time soon, wondering if fundraising is even the right move for your company, or just looking to gain a better understanding of venture capital strategy and deal structure, read this.

Ref: https://medium.com/@producthunt/mattermark-ceo-danielle-morrill-s-book-recommendations-for-entrepreneurs-d50483a316e4#.67ihjzr9a