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I wonder how well they explain to their employees how this can wipe out their upside. Venture Deals by Brad Feld is a great read to help understand why this is potentially a dangerous situation to be in: https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...

⬐ yhoiseth

I’d be interested in hearing more, but not enough to read an entire book. Can you please elaborate or link to a shorter text, such as a blog post?

We're in a similar place -- finished our first priced round.

Comments:

Blatant unfairness: yes, warm intros are required. Yes, this is unfair. However, the onus is on you to make this happen. If you want to found a startup, put your time in to building your network. If you're at a startup now, get intros to the VCs. Ask to go to VC meetings.

When you're building the network of people you're going to ask for angel cash, do the same. Lots of them will be happy to give you those warm intros. So start now building a network of people you can ask for $10-$25k. This wasn't obvious to me, but an intro to a vc from an angel who has invested counts as a great intro.

The same network will get you into one of the good lawyers (cooley, sonsini, gunderson) with a warm intro who will also do a deferred fee deal for $15-$25k. You want this.

The other thing that is unfair is, at least in b2b, the more customers you have the easier a raise will be. How do you get those first customers when you have nothing except a site that breaks all the time and a tiny team? That's your problem; make it happen.

Passionate origin story: we build a b2b tech. Most VCs seemed happy with

1 - we understood this problem from working on/near it

2 - we're building a solution

Oh, and read the book _venture deals_ by brad feld and jason mendelson [1]. Seriously. It's extraordinarily valuable.

Seriously consider doing the YC pre-YC program. It's all funnel for YC, but the info is good. Though it can be summed up (only somewhat facetiously) as, "Have you talked to customers yet? Maybe you should talk to customers. If you've talked to customers, talk to more! If you've talked to more customers, talk to even more! And after that... talk to some customers!"

Understand that the seed and A all want 25%; plan accordingly. Within that range, they are less price sensitive.

If you have questions, I'm happy to answer them, but I'm busy (the startup experience is everyone in your life is grumpy at you for flaking on them) so no promises on response time.

[1] https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...

⬐ digitalboss

Here's the 3rd edition of the Venture Deals book https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...

⬐ siamakf

How can I reach you for fundraising q's :)

⬐ x0x0

put an email in about and ill contact you. I try to say anon on this site.

⬐ taytus

I would love some advice too! Email is on my profile. Thank yoU!

⬐ siamakf

updated my about with email, thanks a lot!!

⬐ azal

Would like to get some fund raising advice as well. Email in about. thnx

For those interested in this topic, I suggest reading 'Venture Deals' by Brad Feld. While it's broader than this topic, it does cover some of the legal/technical elements of vc funding and exits, which help when trying to understand outcomes such as this (i.e., preferred vs common shares, etc). http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Usually recommended:

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Venture Deals by Brad Feld and Jason Mendelson: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Why do you want investors should be your first question. Raising money means dilution and being put on a vesting schedule along with having to deal with liquidation preferences or headaches of convertible debt (see this book[1] to understand some of these terms). Second, finding investors usually takes connections. For young CS grads, easiest way would be through the university's tech commercialization office. Another would be an accelerator or incubator. Then you could reach out to mutual connections in your network to find angel investors or seed funds. Hope that helps. If you need more help feel free to contact me (my email is in my profile). Good luck!

1) http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Perhaps not exactly what you are looking for, but a very good read on the subject is "Venture Deals" (http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...).

If you want to know exactly what rights your shares have (and don't have), this is the book.

Yes, http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

By no means is that complete, but that should give you a primer, and I learned about it from other startups that successfully have raised funds. (I was in the dark too at a point. https://news.ycombinator.com/item?id=4064276)

The other big thing is just to get out and talk with other founders near you. I found (at least in our community) they were very willing to share information over a beer or soda.

The a16z website shows the current portfolio (most recent, un-exited investment) and does not display their entire investment history. If you check out their Crunchbase profile[1], they have already had some big exits with Groupon, Zynga, Skype and Instagram, which is quite impressive since they only started investing 3 years ago. I'm sure there have been some other medium/large M&A liquidity events as well but it usually takes 3-5 years to figure out if your VC portfolio is any good and 7+ years to realize any returns. LPs know this and funds usually have a 10 year life cycle, sometimes with options to extend it a year or two [2].

[1]http://www.crunchbase.com/organization/andreessen-horowitz/i... [2]http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

>to ask for? Is there an "idiots guide" to equity?

Not exactly, but I'd recommend reading http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis... because I think it will help despite being focusing more on founder vs investor rather than employee asking for equity.

Not sure if you meant a book on the web but I liked Venture Deals - http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Rookie mistake. Read Venture Deals: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

⬐ fragsworth

That venture deals book is about founders negotiating with VCs, and probably mentions the "rookie mistake" of the founders getting stuck with paying for the option pool.

We're talking about something different here - a potential hire joining a company and asking for "X% of the company". If the company agrees to this, then the legal document better not say you got X% of the employee option pool. That kind of shit is obviously going to ruin your employee's trust, because it's extremely fucking shady. I would immediately get the impression that the company/founders are big scammers.

⬐ dmourati

The book is about VC period. Authors switch sides in perspective throughout. The rookie mistake, covered at length in the book, was not knowing the difference between the cap table, employee options pool, and fully diluted shares. See, e.g., Appendix A.

⬐ andyidsinga

no doubt. ...ive been meaning to read venture deals myself. my impression of brad feld and jason mendelson is a very positive. Even better I've heard founder devs speak very highly of them.

⬐ yourapostasy

Only in the business world is this behavior not only acceptable but lauded as commendable, and then some businesspeople wonder why their industry gets such a bad rap. Speaking ss a business owner, this is not how I do business, and my experience is if the stakes are not perceived as extremely high, most business people (especially at the mid-level tiers) do not engage in these "sharp dealings" either. The probabilities of running into this behavior go up very rapidly however, when the value perception goes up.

That being said however, I do see this behavior creeping even into settings where I didn't notice it 2-3 decades ago. This tactic only works as long as there is some sink to offload the negative externalities to; that is, everyone else who does not negotiate this way. Developers who are made aware of this "negotiation" style on the other side should make every requirement request an adversarial minimax engagement where they seek to do the least amount of coding for the most profit.

Even today, if you pull similar stunts during negotiations where you perform Clintonian-grade-gyrations through the attorneys, or even more minor shady acts, in my small part of the industry people remember that for a long, LONG time. Word gets around. It follows you from employer to employer now, with the better sales tracking we have these days. And where other customers get cut a lot of slack just for being nice, you're going to be fighting for every micrometer of delivered support. Just because once you set a precedent, no one will to want to get caught on the other side of one of your "gotchas". Good on ya if you have the energy for doing that all the time, but I'd rather be using the time more productively myself.

Coase's theory of the firm and its subsequent expansions by other researchers would find that when everyone engages in this style of negotiation, transactional costs skyrocket. I've had one customer who was particularly enthusiastic about this style of dealing with vendors. We dumped that account onto a competitor.

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

http://www.amazon.com/Mastering-VC-Game-Venture-Start-up/dp/...

http://www.amazon.com/The-Startup-Game-Partnership-Entrepren...

http://www.amazon.com/Term-Sheets-Valuations-Intricacies-Big...

http://www.amazon.com/Venture-Capitalists-Work-Billion-Dolla...

http://www.amazon.com/Raising-Venture-Capital-Serious-Entrep...

http://www.amazon.com/The-Art-Start-Time-Tested-Battle-Harde...

I believe any one or more of those will get you going in the right direction. All of those I've either read, or have seen recommended highly enough by people I trust, that I feel comfortable recommending them. The Guy Kawasaki book is a good, basic introduction to starting a startup, although it's a little old now. I think most of it is still relevant though.

A lot of this stuff is probably on the 'net as well, but you may have to dig around for it a bit. Quora has a lot of good questions (and good answers) on VC / startup topics, so that might be worth a look. Also, a number of high profile VCs maintain blogs where they share a lot of useful information. Mark Suster comes to mind (http://www.bothsidesofthetable.com/) and does Brad Feld (http://www.feld.com/wp/). Note that Brad Feld is the author of one of the above books.

I liked Venture Deals: Be Smarter than your Lawyer and VC.

Amazon affiliate link: http://www.amazon.com/gp/product/1118443616/ref=as_li_ss_tl?...

Amazon non-affiliate link: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

(Choose whichever you prefer.)

⬐ minimax

Thanks (also thanks to mbesto)!