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All the top tier VCs (including YC) repeat the mantra "don't sweat the terms". It also appears on Ron Conway's slide in this lecture. There seems to be a dange

by malanj 12y ago

All the top tier VCs (including YC) repeat the mantra "don't sweat the terms". It also appears on Ron Conway's slide in this lecture. There seems to be a dangerous line between taking a good deal as offered and getting nailed by a bad deal. It's easy for the VC to say "don't sweat the terms", they are setting the terms after all. The advice makes sense if you're working with a top tier firm that has a reputation to protect, but it seems like it could be quite dangerous when applied to lower tier VCs?

cmer 12y ago
I'd argue if a VC is trying to sneak in some non-standard bad terms, you should just walk away. They're definitely not people you want to work with. The best VCs have extremely simple, straightforward terms. I've seen a term sheet from a top tier VC that was just half a page long with no bs in the share purchase agreement either.
idlewords 12y ago
This is one of several significant conflicts of interest in this lecture series. I'm surprised it doesn't seem to bother people to see VC trying to play both sides of the table. The optimal world for investors (a tiny proportion of huge successes) looks very different than the optimal world for startups (many moderate successes). And the idea of investors trying to coach founders on how best to enrich investors is just nuts.
- AndrewKemendo 12y ago
  This isn't for charity. In my opinion this startup school is intended to pump college students into the VC environment so that they (Private funds) can capture as many young, smart talents as possible to add to their portfolios. At the end of the day the "Startup" world is the world of finance, and I think the explosive crop of high risk private equity (Angel, VC, hedge) investors are trying to get as many "makers" into it as possible. Whether this is good for the new entrants or not is too early to tell. I think it probably is when compared to the alternatives, but my guess is that I am missing something.
  - ISL 12y ago
    Is it an advertisement for YC? Absolutely. So is HN. It's also interesting. I don't think I'd have gotten much out of the class as an undergrad, but a decade later, I'm learning a lot from this lecture series. Among the things I've learned: I probably don't want to start a startup; I'd rather focus on great products and execution in my field. I view it as more in line with the Graham/Buffett school of giving back as you go. PG (not BG) has an academic bent, and academics like share what they've learned. Thank you, YC. It's a worthwhile course.
    - HeyLaughingBoy 12y ago
      Heh! Thanks for the clarification. I read Graham/Buffet to mean Ben Graham (http://en.wikipedia.org/wiki/Benjamin_Graham http://en.wikipedia.org/wiki/Benjamin_Graham), not PG so I was a bit confused.
  - hkmurakami 12y ago
    My reaction resembled that of yours. My reaction was, "well this isn't so different from the doctrine of investment banking recruiting, and that is seen as acceptable at the very least, right?"
- applecore 12y ago
  One massive success like Airbnb or Uber means vastly more to the world than even a thousand moderate ones. If your motivation as an entrepreneur is to change the world and not just to make money, your optimal world is one where the chances can be non-zero.
sama 12y ago
the best investors generally offer the cleanest terms. we advise founders to walk away from messy terms. what most investors mean here is not to obsess over small differences in valuation (most good investors don't do this either, but some do).
- jamornh 12y ago
  In that case, what would be the key difference between a clean term vs a messy one? How would a first time founder tell the difference?
  - randall 12y ago
    A simple analog for first time founders is standard docs (series AA & SAFE) vs non standard docs. As an aside, I think it's really hard to get clean terms when you're outside silicon valley... I had a friend raise money in Utah recently and he was saddled with all sorts of strangeness. (board for a $200k seed investment, etc.) Another startup hub advantage.
    - jamornh 12y ago
      Thank you, yes that's a great first filter (standard vs non-standard docs.) Though, as you said, unfortunately it's rare for terms outside the valley to be standard so that might not be as helpful a criteria for founders outside the Valley, and especially for us here in Asia.
    - AndrewKemendo 12y ago
      As an aside, I think it's really hard to get clean terms when you're outside silicon valley Which is the whole point. I was told point blank by Cooley that no one outside of the valley will ever do SAFE because it is different. They also will never do post money options pools which are what YC seems to push for. So good luck everyone else (myself included).
      - yesimahuman 12y ago
jackgavigan 12y ago
There's a difference between "Don't overnegotiate" (or "Don't jeopardise a deal in an attempt to raise your valuation by a small percentage") and "Don't sweat the terms." There are some seriously unscrupulous investors out there. If any terms give you cause for concern, get second, third and fourth opinions from independents.
aliakhtar 12y ago
I think their point is, if you have 5 investors, 4 of them are offering you a high valuation and terms, and 1 of them has the lowest valuation but he brings the most to the table in terms of connections, advice, being aligned with you on the vision, etc, then you should go with that last investor, even though his valuation is the lowest. This is the same point that CloudFlare's founders stressed in their recent interview on startup school.
silverlake 12y ago
Ironically I was just listening to Geoff Donaker's (from Yelp) talk at Stanford. At the end someone asks what were the biggest problems they faced. #1 was sweating the terms with their investors. http://ecorner.stanford.edu/authorMaterialInfo.html?mid=3301 http://ecorner.stanford.edu/authorMaterialInfo.html?mid=3301

by malanj 12y ago

cmer 12y ago

I'd argue if a VC is trying to sneak in some non-standard bad terms, you should just walk away. They're definitely not people you want to work with. The best VCs have extremely simple, straightforward terms. I've seen a term sheet from a top tier VC that was just half a page long with no bs in the share purchase agreement either.

idlewords 12y ago

This is one of several significant conflicts of interest in this lecture series. I'm surprised it doesn't seem to bother people to see VC trying to play both sides of the table. The optimal world for investors (a tiny proportion of huge successes) looks very different than the optimal world for startups (many moderate successes). And the idea of investors trying to coach founders on how best to enrich investors is just nuts.

AndrewKemendo 12y ago
This isn't for charity. In my opinion this startup school is intended to pump college students into the VC environment so that they (Private funds) can capture as many young, smart talents as possible to add to their portfolios. At the end of the day the "Startup" world is the world of finance, and I think the explosive crop of high risk private equity (Angel, VC, hedge) investors are trying to get as many "makers" into it as possible. Whether this is good for the new entrants or not is too early to tell. I think it probably is when compared to the alternatives, but my guess is that I am missing something.
- ISL 12y ago
  Is it an advertisement for YC? Absolutely. So is HN. It's also interesting. I don't think I'd have gotten much out of the class as an undergrad, but a decade later, I'm learning a lot from this lecture series. Among the things I've learned: I probably don't want to start a startup; I'd rather focus on great products and execution in my field. I view it as more in line with the Graham/Buffett school of giving back as you go. PG (not BG) has an academic bent, and academics like share what they've learned. Thank you, YC. It's a worthwhile course.
  - HeyLaughingBoy 12y ago
    Heh! Thanks for the clarification. I read Graham/Buffet to mean Ben Graham (http://en.wikipedia.org/wiki/Benjamin_Graham http://en.wikipedia.org/wiki/Benjamin_Graham), not PG so I was a bit confused.
- hkmurakami 12y ago
  My reaction resembled that of yours. My reaction was, "well this isn't so different from the doctrine of investment banking recruiting, and that is seen as acceptable at the very least, right?"
applecore 12y ago
One massive success like Airbnb or Uber means vastly more to the world than even a thousand moderate ones. If your motivation as an entrepreneur is to change the world and not just to make money, your optimal world is one where the chances can be non-zero.

sama 12y ago

the best investors generally offer the cleanest terms. we advise founders to walk away from messy terms. what most investors mean here is not to obsess over small differences in valuation (most good investors don't do this either, but some do).

jamornh 12y ago
In that case, what would be the key difference between a clean term vs a messy one? How would a first time founder tell the difference?
- randall 12y ago
  A simple analog for first time founders is standard docs (series AA & SAFE) vs non standard docs. As an aside, I think it's really hard to get clean terms when you're outside silicon valley... I had a friend raise money in Utah recently and he was saddled with all sorts of strangeness. (board for a $200k seed investment, etc.) Another startup hub advantage.
  - jamornh 12y ago
    Thank you, yes that's a great first filter (standard vs non-standard docs.) Though, as you said, unfortunately it's rare for terms outside the valley to be standard so that might not be as helpful a criteria for founders outside the Valley, and especially for us here in Asia.
  - AndrewKemendo 12y ago
    As an aside, I think it's really hard to get clean terms when you're outside silicon valley Which is the whole point. I was told point blank by Cooley that no one outside of the valley will ever do SAFE because it is different. They also will never do post money options pools which are what YC seems to push for. So good luck everyone else (myself included).
    - yesimahuman 12y ago

jackgavigan 12y ago

There's a difference between "Don't overnegotiate" (or "Don't jeopardise a deal in an attempt to raise your valuation by a small percentage") and "Don't sweat the terms." There are some seriously unscrupulous investors out there. If any terms give you cause for concern, get second, third and fourth opinions from independents.

aliakhtar 12y ago

I think their point is, if you have 5 investors, 4 of them are offering you a high valuation and terms, and 1 of them has the lowest valuation but he brings the most to the table in terms of connections, advice, being aligned with you on the vision, etc, then you should go with that last investor, even though his valuation is the lowest. This is the same point that CloudFlare's founders stressed in their recent interview on startup school.

silverlake 12y ago

Ironically I was just listening to Geoff Donaker's (from Yelp) talk at Stanford. At the end someone asks what were the biggest problems they faced. #1 was sweating the terms with their investors. http://ecorner.stanford.edu/authorMaterialInfo.html?mid=3301 http://ecorner.stanford.edu/authorMaterialInfo.html?mid=3301