Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Investors will also expect a company to include copies of its financial records, budgets, major customer lists, and employment agreements in its data site.

Every employee of a startup, including founders and each of the company’s executives, must sign a Proprietary Inventions and Assignment Agreement to protect the startup’s rights to its intellectual property.

Never forget the simple idea that if you want money, ask for advice. Try to develop a relationship that evolves over time, instead of viewing fundraising as a single, transactional experience.

Approval by investors’ partnerships. This is secret VC code for “This deal has not been approved by the investors who issued this term sheet.” Therefore, even if you love the terms of the deal, you still may not have a deal.

When signing a term sheet, always ask your VC whether the terms have been approved by the partnership or if there is another approval step in the process.

You should have reasonable and customary D&O insurance for yourself as much as for your VCs. While the indemnification clause is good corporate hygiene, make sure you follow it up with an appropriate insurance policy.

After you’ve started to engage with a particular VC, make sure you understand their process. A few will tell you, but most won’t. After you’ve had a second meeting, ask what the process is going forward.

the only real terms that matter are economics and control.

Regardless of who your investors are, fight to have them vote as a single class. It’s critical for your sanity. It keeps investors aligned. And as long as your capitalization table is rational, it won’t matter.