When you are raising money for the first time from VCs, there is no other way to say it than you are swimming with the sharks. That doesn’t mean that all VCs are out to get you, it just means that you’re doing something perhaps a bit unnatural (raising capital) in an area that they are perfectly comfortable and know all of the tricks of the trade. Like anything else, the best way to level the playing field somewhat is with knowledge. Entrepreneurs are very lucky now because so many VCs, Angels and former Entrepreneurs are blogging about their experiences that it is becoming easier and easier to work out what things to pay attention for.
One of the things you need to understand when you raise your first round of funding are the terms like: “Pre-Money”, “Post Money”, “Liquidation Preferences” and “Option Pools”. I’m embedding a video from the ThisWeekIn.com show, This Week in Venture Capital hosted by Mark Suster. Mark is a VC at GRP Partners and has previously founded and started two companies, one of which sold to Salesforce.com. The episode in the video discusses valuations, terminology and is a great primer for entrepreneurs on how to understand much of the basics in their discussions with VCs.
The other resource that Mark offers up in this video is the Cap Table spreadsheet. To make it easier for you, I’ve pulled the link to it out and you can now fid that spreadsheet right here. This is a pretty hand resource as well that Mark has kindly given away.
Are there any terms or concepts that you’ve heard in relation to raising money that you’d like explained? Feel free to leave a comment or send me an email and maybe we can make that the topic of a new post.
