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  VC motivations   Driven by their model   Impacts their terms and expectations

  Most companies aren’t VC’able   Just don’t fit the “Big Money” model   May be good companies and businesses

  But if you are than you’ll be better equipped than most because of tonight

  1,000 companies   10 investments

  2 may be widely successful (usually 1)   6 “land of the living dead”   2 fail horribly

  Winners to offset my losers   Start ups 10-12x return in 5-7 years   Existing companies 5-7x in 4-5 years

  A company that doubles isn’t enough…   Every opportunity has to have the

potential to be a home run

  YouTube sold to Google for $1.65 Billion   Sequoia invested $11.5M received $495M

  30% of the company   43x return   Great deal!

  6-9 months to raise capital   Several meetings

  Want to get to know you   Assess your “Say/Do” factor   Close to truth ▪  Builds confidence

  Personal Recommendation:   Get to know the VC ▪  Process (who makes the decision, when & how

often) ▪  Where are they in their fund life cycle ▪  What was their last deal ▪  Talk to their existing CEO ▪  Cash available to invest/reserves ▪  No “Yes” means “No”

  Have to be able to live with them “til exit do you part”

  Non-binding offer to invest   Outlines the general terms and conditions

of investment   Which may change

  Not the definitive agreement, simply a place to start

  Everyone uses it

  Non-heartache   Company name   Investors   How much   Date

  Founders   Employees   Consultants   Students/universities/research

organizations etc   Avoid convoluted IP structures

  Only going to be unwound

  Non-competition   Non-solicitation

  Customers   Employees

  IP Assignment

  Ensure one common motivator   Need to attract talent   15%-20% (low as 12%)   New CEO   New executives   Board members

  Non-VC   Pre-$

  Dilutive to you

  Preferred shares   Accrue   Price + dividend convert

  Protects an investor from down round   As if their investment had been done at the

current lower price   Keeps the investor whole in bad times   Full-ratchet   Weighted average

  VC can ask to have the company buy back shares

  Life of the fund   Investors in funds want their money back   Outcome:

  Forces a sale   Get minimum investment back (P+dividends)

  Power of “OPM”   Get to know your VC   Won’t matter in good times   Can’t tell you what to do but prevent you from

doing things

  60-66 2/3%   Change nature of the business (acquire/divest)   Change capital structure/articles ▪  Default approval over future financing

  Approve business plan/operating plan   Change in key employees (defined term)   Creation of ESOP   Unbudgeted expenditure in excess of $5,000   Non-arms length transactions   ….

  Monthly prepared financial provided   20-30 days from month end

  Quarterly financials   Analysis vs budgets

  Board material   Yearly operating plan

  (30 days prior to beginning of fiscal year)

  Founder restrictions   Drag Along

  VCs need exit   Tag Along

  I can sell a portion if you can

  Friends and family   Move to 5

  2 investor   2 founder   1 independent   Expect material in advance of meeting   Only a meeting if the VC is there ▪  Defer once

  Acceptance & Exclusivity   Deadline for acceptance   Use the time to negotiate   No “shop” ▪  Applies to company, depending on stage founders

Be careful what you ask for …don’t send the wrong message