I just found Mark Suster’s blog Both Sides of the Table. It’s really good information and I’ve added it to my blogroll. This post on common start-up mistakes is particularly good, especially the advice he gives on addressing founder vesting at the beginning as opposed to when the VCs enter the picture.
Great post here from Mark Cuban on how NOT to pitch a prospective investor. Bottom line: be simple, be direct, be on point, and no grandiose puffery bullshit.
Great article here on why many doctors are reluctant to adopt electronic medical records.
China Law Blog had a good post the other day on China OEM agreements, including some interesting points on using Chinese as the official language and governing law/venue.
Here’s a great article from Venture Hacks on how to put together an effective slide presentation for investors. The key link in the article is to a classic post from David Cowan entitled “How Not to Write a Business Plan“.
Mega VC firm Sequoia Capital also has some good info (similar to Venture Hacks above) about slide decks here.
China Law Blog nicely summarized the crucial imporantance of a strong contract when dealing with China here. A few takeaways:
1. Chinese companies are not that different from U.S. companies in how they view contracts in many respects. For example, a strapped Chinese company might pay its Chinese vendors before its U.S. vendors, not because of culture, but because the Chinese ones can cause trouble more quickly. Same is true in the U.S.
2. If you don’t have a good contract, you’re dead if you end up in a dispute.
3. You are usually better off with a Chinese language contract that allows for litigation in China.
Back on the blog horse again…
Fred Wilson posted a great summary of the terms that venture capital investors will care about the most, and why, here. They are:
1. Liquidation Preference. This simply means that, when the money comes out, the VCs get their money out first, plus any accrued preferred returns. In the post-bubble era, this frequently was a multiple of the investment (I saw as high as 3x). Today, the typical deal is just 1x. A related term that is very important to the founders is whether the preference is participating. A participating preference means the VCs get their preference, PLUS whatever they would receive on an as-converted basis. Most deals these days are non-participating, meaning that the VC must choose between either taking their preference OR converting to common and participating with the common. Hopefully (for both sides), they will want to convert, because that means their return is much bigger than 1x.
2. Participation rights in future rounds. Fred notes that, typically, a few early rounds deliver the vast majority of the returns, so the VC will want to be able to participate in those rounds after the initial investment. Secondly, this right helps the investor avoid being crammed down by a highly-dilutive down round, if one occurs.
3. Board seat. This is the most direct way that a VC can influence the company, and thus protect their investment.
The title says it all. I heard this quote last week from Mike Lombardi, who writes for FootballPost.com and is a former NFL general manager. However, it applies equally well to emerging businesses. I’ve often seen businesses built on a mountain of assumptions, with no contingency plans. Remember, when you start a business, Murphy’s Law doesn’t just apply, Murphy will be one of your investors and he’ll move into the nearest cubicle.
The FastPitch final event was awesome; I really enjoyed it and was proud to have our firm sponsor it. Congratulations to Vintage Graphs for winning the Grand Prize. Also congrats to Lifetime Reel, HouseLens, and GPS Assassins (in that order) for taking the other three top prizes.
The Chinese court system now has a website where they will list the names of all delinquent judgment debtors. Previously, a written request was required to find out this information.
China Law Blog has a great post about the likely very significant impact of this list on the prospects of collecting on a debt in China. As he notes in the post, the operative question is NOT whether you can sue and win, but whether you can collect. Of course, that’s also true in the U.S., because you can’t always be certain whether your debtor can or will pay you, but at least you know that the government will help you enforce the judgement. Not so in China, so this public listing of bad judgment debtors should be important in a society where respect (often called “face”) is so important.