I have been talking to numerous founders lately about the various oddities and niceties of raising funds – and the crazy things that VCs and aggressive angels do. Over the years I have advised many companies and I thought that there was a page that gave the founder-centric view of things – but I can’t find it. So… Here we go.
General Terminology – CB Insights does a good job here. Key for raising are the following phrases (go to the page for the definitions):
- pre-money valuation and post-money valuation are crucial terms – simple to get but if you haven’t heard them they sound odd.
- liquidation preferences and especially any mention of a full ratchet.
- Be really careful about liquidation preferences.
- Watch out for the employee stock option game that aggressive VCs play. This seemingly simple concept creates massive dilution that isn’t in a founder’s favour.
Interesting Approach – Vesting for Founders – One interesting thought is that some of the best places have quite long vesting periods, even for founders. AngelList, for example, has a 6-year vesting period – for everyone, including Naval.