We see this scenario time and time again. When a cash-strapped venture starts getting some serious traction and begins negotiating with potential investors and partners, its founders quickly realize that the investors and their attorneys are far more deal savvy than technology entrepreneurs.
It makes for an unlevel playing field.
While representatives of such ventures can’t help getting excited by the promise of large funds (which in many cases can add tremendous opportunities for their businesses), it’s critical to calmly evaluate the offers and not be drawn into a savvy investor’s web.
I’ve represented the interests of multiple VC and Private Equity companies over the years as general counsel and fully understand that without strategic representation by qualified and experienced counsel, the founders of such technology ventures are likely to get the short end of the stick.
Nothing gives an early technology venture more leverage in deal negotiation as support from experienced counsel that can protect the interests of a company’s founders and their key employees in negotiating a “right size” investment.
In a VC financing, experienced legal counsel affiliated with knowledgeable finance consultants can help the funds-seeking venture to carefully navigate issues of pre-money vs. post-money valuations and liquidation preferences for investors. They can also provide such ventures with additional credibility in negotiating a deal.
Gellis Law Group offers comprehensive support to start-up technology ventures in financing negotiations.