Category: Books
Brews and Views – Deciphering What The $@%@$ Entrepreneurs Really Need to Know About Investors
Our friends at Dorsey & Whitney are hosting me and Jason Mendelson this Thursday, October 20th from 4pm to 6pm to drink beer together and discuss “what really matters” in a venture deal. While the event requires registration, I’ve been told that copies of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist will be given to whomever shows up (until they run out) and that the beer will be a collection of yummy local microbrews provided by Devil’s Canyon Brewery Company in Belmont.
Jason and I will sign any copy of our book that appears at the event. We’ll also drink a few beers with you. Plus, who could resist a title of an event sponsored by a law firm that says “What The $@%@$” in the title.
Thursday 10/20
4pm – 6pm
Dorsey & Whitney
305 Lytton Ave.
Palo Alto, CA 94301
My friend Dov Seidman, the CEO of LRN, has a new edition of his book How: Why How We Do Anything Means Everything out. In this copy, the forward is by President Bill Clinton, who has firmly embraced Dov’s philosophy of HOW.
We’ve been investors in Dov’s company LRN for the past decade and over the last five years I’ve gotten to know Dov and his wife Maria pretty well. They are a dynamic entrepreneurial couple, as Maria is founder / CEO of a new company called Yapp. In addition to being hard at work creating their companies and raising a family, they both live incredibly principled lives. How they do this is embodied in Dov’s philosophy about HOW.
Ever since I’ve know Dov, he’s talked about the importance of HOW. Not what, not why, not how much – just simply HOW. We’ve had our share of long conversations about a variety of topics, but they all come back to the HOW of things.
Dov believes that HOW is everything. It’s not what you do that matters, but how you do it. LRN exists to help businesses understand and incorporate this concept, as the historical approach to business has been all about “how much”, and if you read, ponder, think carefully about, and internalize Dov’s writing and philosophy, you quickly realize that “how much” is irrelevant when lined up against HOW as a construct.
While this applies to business, it also applies to life. My favorite part of working with and talking to Dov is just letting our conversations go wherever they want. While we occasionally stay focused on business, we often drift into wide ranging discussions about our individual lives, HOW we address things, and HOW it all works, and HOW we think about it.
Sure, there is plenty of why and what and where and who in our conversations, and I continue to be a very strong believer in the use of the five whys (continually asking why to get to the root cause of things), but I’m also a deep believer in asking about and focusing on the HOW.
I have dinner with Dov on Monday night and am looking forward to it very much. In the mean time, I encourage you to get a copy of How, read it thoughtfully, and think hard about the HOW in everything you do.
I’m in San Francisco right now and then New York later this week. When I look at my schedule, and where I’m hanging out, I realize that even though I’m in two very big cities, I’m going to spending most of my time in a very small area.
When asked why Boulder is such a vibrant entrepreneurial community, I talk about a concept I call entrepreneurial density. Boulder is a small town – the city itself is only 100,000 people. Yet the number of entrepreneurs in Boulder is significant. And the number of people working for startups is off the charts. Start with the definition:
entrepreneurial density = ((# entrepreneurs + # people working for startups or high growth companies)) / adult population
My guess is that Boulder’s entrepreneurial density is one of the highest in the United States. I don’t have any empirical data to back this up – it’s a qualitative assessment based on my experience traveling around and investing in different parts of the US.
While population is one measure, I’ve also started thinking about geography as another. In the case of Boulder, the core of the entrepreneurial community is in downtown, which is a 10 x 4 block area. Even though downtown Boulder is small, it has different personalities (yes – we have an east side and a west side), yet you can walk from one end to the other in ten minutes. And, inevitably, when I walk across town I always bump into people I know.
The geography index matters even in places like New York. When I stay in New York, I generally stay within walking distance of Union Square. Sure, I end up in midtown or downtown occasionally, but most of my time is spent in a 20 x 8 block area. The bay area splits similarly – I’m in San Francisco within walking distance or a short drive of many of our bay area companies, but I’m on the other end of the planet from Palo Alto.
As I think more about entrepreneurial communities, I’m starting to expand my definition of entrepreneurial density to include by population and geography. This seems to matter a lot, even in very large entrepreneurial communities like New York and San Francisco.
I’m curious about experiences in other parts of the country, especially entrepreneurial communities that are growing or trying to reinvigorate themselves. How does entrepreneurial density (either geo or population) impact you?
Jason Mendelson and I are doing office hours at the Boulder Bookstore on Monday 9/26. We will be hanging out from 2pm – 5pm and chatting with whomever comes by. It’ll also be a chance to buy a copy of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist from your local bookstore and get a copy of it signed by both of us while you wait.
We’ve been asked by a lot of folks how to get a copy of the book signed by us. This is one way; the other is to buy a signed copy directly from us off of the AsktheVC site. Either way, we’d be happy to see you on Monday if you want to swing by. I think Jason will be wearing his wig from I’m a VC.
I’ve always loved getting books signed by the author. As an author of two books, it makes me smile a huge smile when someone asks me to sign a copy of my book for them.
With Kindlegraph, I can finally sign my Kindle books. I met the founder, Evan Jacobs, at Glue a few months ago. He had just started putting books up on it and I immediately told him that I was game to put Do More Faster up. I tweeted about it and signed a few.
Now that Venture Deals is out I’ve got them both up on Kindlegraph. If you have a Kindle version of either book, or you are buying one, and want me to sign it, just go to my Kindlegraph author page and request for me to sign the book.
And if you haven’t bought the Kindle versions of Do More Faster or Venture Deals, what are you waiting for?
When Jason and I set out to write Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, we both agreed that we wanted to try to create as useful and durable a reference guide for entrepreneurs interested in raising a round of venture capital as we could. As a result, we created a Resources page on Ask the VC and decided to load it up with legal documents that are part of a venture capital financing.
Now, while I’d like to be able to simply do all of my financings with a handshake, or possibly on a napkin written in crayon, I also wish I had a herd of unicorns, surrounded by rainbows, a balanced US government budget, and agreement on how to address the debt ceiling issue.
As a step in the right direction, Jason and I decided to open source our Foundry Group form legal documents. You can find them on the Ask the VC Resources page. Included are our standard forms for the following:
- Series A Term Sheet
- Series A Preferred Stock Purchase Agreement
- Investor Rights Agreement
- Co-Sale Agreement
- Voting Agreement
- Series A Restated Certificate of Incorporation
- ByLaws
If you do a deal with us, simply feel free to mark them up. Or use them for other deals. Or study them, in conjunction with Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, to know what we do and don’t care about (yes – there are some hidden extra-bonus tips in the forms for you to enjoy if you want.) Of course – all of the traditional legal disclaimers apply (e.g. “You take full responsibility for using these documents. We aren’t your lawyers and we give no warranties (express or implied) that they documents are any good or legally enforceable.”) So make sure you have a good lawyer advising you, even if you are smarter than him.
We’ve included plenty of other bonus material on this page, including LOI / merger docs and seed deal docs. We’ve got more coming, including a thorough dissection of a convertible note (and all the various permutations), but we thought this would be plenty to digest for now.
And if you find some unicorns, or typos in the documents, send them my way.
My partner Jason Mendelson and I are psyched to announce that our book – Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist – has been published and is now available. We are also relaunching AskTheVC – the companion website to the book that we maintained for several years, went dormant for a while, but is alive with content once again.
The book originated in 2005 when Jason and I wrote a long series of posts on this blog about a typical Venture Capital term sheet. It took us a year or so to get all the way through it, but it was fun and generated an enormous amount of positive feedback from entrepreneurs (and would be entrepreneurs) who told us how helpful it was for them to understand how a VC term sheet actually worked.
People regularly suggested that we turn the blog series into an actual book. Until about a year ago we’d simply encourage people to PDF up the posts and do whatever they wanted with them. We got great feedback from students and entrepreneurs all over the world who said they were on the receiving end of the posts, that the posts had been used as the curriculum for a class, or that they had simply referred to them during a negotiation and they were “more helpful than their lawyer.”
After I wrote Do More Faster: TechStars Lessons to Accelerate Your Startup with David Cohen (the CEO of TechStars), Jason and I decided to write Venture Deals. We knew the term sheet series would only be a small part of the book and would have to be re-written, so we just got to work. Once again, it feels amazingly good to “ship the book” – it’s remarkably hard work to get from “an idea for a book” to an actual book.
For those who think this is just a reprint of the blog posts, they make up less than 20% of the book and have been completely rewritten. The table of contents gives you a feel for this.
- The Players
- How to Raise Money
- Overview of the Term Sheet
- Economic Terms of the Term Sheet
- Control Terms of the Term Sheet
- Other Terms of the Term Sheet
- The Capitalization Table
- How Venture Capital Funds Work
- Negotiation Tactics
- Raising Money the Right Way
- Issues at Different Financing States
- Letters of Intent – The Other Term Sheet
- Legal Things Every Entrepreneur Should Know
While it’s a chewy topic, we’ve tried to keep it light, fun, and enjoyable. But we’ve also tried to make it a must read for any entrepreneur, or would be entrepreneur, or student interested in entrepreneurship, or junior lawyer that is working on deals, and our parents. We’ve created a dynamic companion site at AskTheVC, are working on a teaching guide, and have a few entertaining surprises up our sleeve that will be launched in early September.
Since I’m a shameless book salesman, you’ll be hearing plenty more from me on this blog. But for now, go take a look at Fred Wilson’s wonderful review titled Be Smarter Than Your Lawyer and Venture Capitalist.
A few weeks ago my dad said “Brad, you have to read the book I Am John Galt: Today’s Heroic Innovators Building the World and the Villainous Parasites Destroying It. You’ll love it.” That’s all the recommendation I needed – it went to the top of my Kindle reading list.
I read it the other night in a jet lagged haze on my couch. I was wide awake at 2am without the book, but it had me consumed for a few hours. The author, Donald Luskin, is polarizing, as evidenced by his wikipedia page and entertaining conflict with Paul Krugman (who he skewers in the book).
If you aren’t an Atlas Shrugged fan, this book isn’t for you. But if you are, go grab it now – you’ll love it. Luskin does the biography of the following nine men by lining them up with characters in Atlas Shrugged. He does a magnificent job of deconstructing the people in the context of the Altas Shrugged character, while writing an original narrative on the character and biography on the person being referenced.
- Steve Jobs – Howard Roark
- Paul Krugman – Ellsworth Toohey
- John Allison – John Galt
- Angelo Mozilo – James Taggart
- Bill Gates – Henry Rearden
- Barney Frank – Wesley Mouch
- T.J. Rodgers – Francisco d’Anconia
- Alan Greenspan – Robert Stadler
- Milton Friedman – Hugh Akston
My only disappointment was that he didn’t tackle a character for Dagny Taggart.
Amy and I have just launched a new project we are working on together called Startup Marriage: Balancing Entrepreneurship and Relationship. It includes a blog, a tweet stream, and a book (hopefully by the end of the year.)
Since the beginning of 2010 I’ve written two books. The first, Do More Faster: TechStars Lessons To Accelerate Your Startup, was with David Cohen, the CEO of TechStars. The second, Venture Deals: Be Smarter Than Your Lawyer And Venture Capitalist, was with Jason Mendelson, one of my Foundry Group partners. Wiley published both of them and I’ve learned a lot about writing a long form book. I’ve also enjoyed the process and the work immensely, except for the final, mind-numbing edit cycle.
Amy and I have been talking about writing Startup Marriage for several years. Do More Faster’s last chapter is on Work-Life Balance and I have written a lot about Work-Life Balance on my blog. While there is always more to learn and figure out, Amy and I have gotten a lot of things right, although we’ve had plenty of ups and downs along the way as we’ve figured this stuff out.
We’re spending a good chuck of our time in Paris and Italy writing together. Our goal is to have a solid draft of the book done by the time we get back to Boulder after Labor Day. We haven’t decided whether to self-publish or go with a publisher this time around – we’ll see how we feel when we get a little closer to the end of the draft. In the mean time, we’ll be blogging regularly on the Startup Marriage blog about a wide variety of topics, including the experience of writing a book together. We hope you’ll follow us and participate!