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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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Venture Deals summary
Brad Feld and Jason Mendelson
Be Smarter than Your Lawyer and Venture Capitalist
21 mins
Brief summary
Venture Deals by Brad Feld and Jason Mendelson is a guide to the world of venture capital and startup financing. It offers valuable insights into negotiating term sheets and understanding the complex landscape of raising capital.
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Venture Deals
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Key idea 1 of 9
Venture deals are the perfect form of finance for start-ups.
Imagine that you’ve finally started putting your great business idea into action; you’ve founded your company and have a motivated team behind you. So what’s missing?
Right, you need money to have your breakthrough. But money doesn’t grow on trees. Where on earth are you going to find it? Many start-ups look to venture capital to find the money they need for success.
When entrepreneurs raise venture capital, they receive an influx of cash from an investor, called a venture capitalist (VC), in exchange for shares (and thus control) over the their companies.
While venture capital is a fairly uncommon funding strategy, for innovative start-ups with risky ideas it can be the most effective:
Start-ups lack the long operational history necessary to raise funds on credit, e.g., from a bank loan. Venture capital, in contrast, doesn’t require a company to be established, and therefore is perfect for start-ups.
Even some of today’s largest, most successful companies had humble beginnings that were jump-started by venture capital. Google, for example, got its first venture capital injection of $100,000 in 2000, two years after its founding. One year later it attracted another $25 million investment.
It was this huge investment that allowed Google to quickly expand to the point that it now has its own venture capital arm to invest in other new firms.
However, venture capital becomes complicated when it involves different people with different goals. Because venture capital is often raised with several financing rounds, companies have an opportunity to get multiple cash injections, but it comes at a cost:
It’s quite common for companies to be financed by multiple investors, which in turn means dealing with multiple shareholders, their interests and influence. Of course, they don’t all share the same goals.
For example, one shareholder might want to make a quick buck, and thus push for risky strategies and then sell his shares, whereas others play it safe and push for long-term gains.
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What is Venture Deals about?
Venture Deals offers insider insights into the mechanisms that govern venture capital deals as well as tricks that will help you get the most out of negotiations with investors. It lays out the nuts and bolts of venture capital deals in a way that is both easily understood and will give you an edge at the negotiations table.
Best quote from Venture Deals
Fact: Between 3000 to 4000 companies are funded by venture capital each year in the US.
—Brad Feld and Jason Mendelson
Who should read Venture Deals?
- First-time entrepreneurs who want to take their company to the next level
- Experienced entrepreneurs who want to hone their negotiating skills
- Anyone who needs financial resources to turn his or her great idea into a business
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