{"id":7599,"date":"2017-07-19T09:00:55","date_gmt":"2017-07-19T01:00:55","guid":{"rendered":"https:\/\/zegal.com\/?p=7599"},"modified":"2023-11-28T22:32:17","modified_gmt":"2023-11-28T14:32:17","slug":"5-tips-negotiating-vcs","status":"publish","type":"post","link":"https:\/\/zegal.com\/en-sg\/blog\/post\/5-tips-negotiating-vcs\/","title":{"rendered":"5 tips for negotiating with VCs(Venture Capitalists)"},"content":{"rendered":"

As an entrepreneur looking for funding, it might seem that you are the one at the mercy of all your potential funders out there \u2013 banks, angel investors, venture capitalists, and the lot. While it is true that the process of securing funding is a competitive one that requires you to be at the top of your game, this does not mean that you have no bargaining power at all.<\/p>\n

In the case of obtaining venture capital, this is an important business deal that will have significant implications on how you grow your startup and seek more funding in the future. As a startup founder, you need to realise that there is a point beyond which the deal is no longer beneficial to you. Here, we give you five tips on how to negotiate with VCs so that you can strike a deal with makes sense for both parties:<\/p>\n

<\/span>Tips for\u00a0 Negotiates with VCs(venture capitalists)<\/span><\/h2>\n

<\/span>1. Deliver a solid pitch<\/span><\/h3>\n

After spending time building relationships with VCs and securing meetings with them, the next important step is delivering an executive summary that will clearly articulate your business plan and address all the concerns on the VC\u2019s mind. This can be an intimidating process so it is crucial that put yourself into the VC\u2019s shoes and ensure that you cover all your bases. Beyond the relevant financial projections that shows you know the market size and scalability of your startup, VCs also care about the more intangible elements, such as the credibility of the founders. All these contribute towards their assessment of whether your startup is a right fit for their investment portfolio.<\/p>\n

According to Zegal mentor Emmanuel Pitsilis, there are nine key elements you should include in your executive summary:<\/p>\n

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  1. A clear simple hook.<\/li>\n
  2. A problem you are addressing.<\/li>\n
  3. A tangible solution that strikes the imagination.<\/li>\n
  4. A well-thought through business and economic model.<\/li>\n
  5. The size of the business opportunity.<\/li>\n
  6. Distinctiveness and defensible differentiation.<\/li>\n
  7. Intellectual property & protection.<\/li>\n
  8. Your team & your passion.<\/li>\n
  9. Funding required.
    \nTo make sure you don’t skip any of these fundamental elements, use a business pitch deck template<\/a> that has the structure already in place.<\/li>\n<\/ol>\n

    <\/span>2. Get into the VC mindset<\/span><\/h3>\n

    As in every negotiation, it\u2019s all about getting understanding the goals of both parties. On your end, make a list of what you want from the negotiation. Have in mind what your boundaries are so you know what will cause you to walk away. In turn, make sure that you understand the VC\u2019s motivations, obstacles and goals. This will allow you to frame your goals as solutions to a problem VCs are trying to solve.<\/p>\n

    According to Asia\u2019s most influential VCs<\/a>, such as Golden Gate Ventures and Sequoia Capital, these are the top things they look out for:<\/p>\n

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    1. \n
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      1. Walk the talk<\/li>\n
      2. A focused leader & a coachable team<\/li>\n
      3. Scalability<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

        <\/span>3. Know the terms of the Term Sheet<\/span><\/h3>\n

        Once you\u2019ve gotten a VC interested in your startup, the next step would be to sign a Term Sheet<\/a>. The Term Sheet sets out the offer from the investor to a company to purchase shares in the company. While the Term Sheet itself is not legally binding, it serves as an essential document that helps both your startup and the VC reach preliminary and conditional agreement on key terms of the investment during the negotiation stages. It is thus important to look out for the following key clauses in a Term Sheet:<\/p>\n

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