MFIN2210 Chapter Notes - Chapter 3, 7, 11: Best Alternative To A Negotiated Agreement
11 Jun 2018
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Department
Course
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Chapter 3
Overview of the Term Sheet:
Key Concepts:
1.) Economics
· Return investors will eventually get in a liquidity event
2.) Control
· The mechanisms that allow the investors either to affirmatively exercise control over the
business or to veto certain decisions that the company can make
When companies are created, the founders receive Common Stock
When VC’s invest, they get equity and often Preferred Stock
Chapter 7
The Capitalization Table:
· Summarizes who owns what part of the company before and after the financing
When you initially set up the company, 100% will be allocated to the founders and employees,
with a specific number of shares allocated to each individual
Chapter 11
Negotiating Tactics:
What matters
1.) Achieving a good and fair result
2.) Not killing your personal relationship
3.) Understanding the deal that you are striking
*You need to be prepared and know what you want heading into a negotiation
** A 20 year old inexperienced entrepreneur doesn’t stand a chance against an older
experienced VC
Game Theory
· If you both cooperate, the outcome is best, in the aggregate form for them both
Negotiating Style and Approaches:
· Bully
· Nice Guy (Car Salesman)
· Technocrat
· Wimp
· Curmudgeon
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Return investors will eventually get in a liquidity event. The mechanisms that allow the investors either to affirmatively exercise control over the business or to veto certain decisions that the company can make. When companies are created, the founders receive common stock. When vc"s invest, they get equity and often preferred stock. Summarizes who owns what part of the company before and after the financing. When you initially set up the company, 100% will be allocated to the founders and employees, with a specific number of shares allocated to each individual. *you need to be prepared and know what you want heading into a negotiation. ** a 20 year old inexperienced entrepreneur doesn"t stand a chance against an older experienced vc. If you both cooperate, the outcome is best, in the aggregate form for them both. Have a batna: best alternative to negotiated agreement. *never give your term sheet to a vc.
