6 SECRETS OF RAISING START UP CAPITAL is the resource textbook that accompanies the three day master class workshop developed by two prominent Silicon Valley entrepreneurs as a fund-raising tool-box for small business owners. Bill Fisher and Tom Powell, both former executives with Wells Fargo Bank, have distilled the essential lessons learned in raising $1 billion of capital for their own businesses. In this practical handbook, explained in common sense terms, they outline the building blocks necessary to raise capital for your own business idea.

SECRET FIVE: MANAGING THE NEGOTIATION (EXCERPT)

              …..You are going to experience waves of joy when you hear from an interested investor who says they are going to make an offer. When this happens you are likely to hear your investor say something similar to, “We would like to proceed to a term sheet. We are working on our end to create the initial terms and we want to move forward.”

               It is in this moment of elation that danger sets in. You are going to have a hard time listening to anything the investor has to say after “I want to move forward,” but you now need to get really focused. This transition, from dating to negotiation with your future partner, marks the turning point where, blinded by a sense of your own long-awaited success, you are most in danger of driving your dream off the road. Or unwittingly handing the keys to the vehicle to your new investor. You may have heard horror stories of entrepreneurs that, despite building a great business, were thrown out by their investors, or denied their fair share of the economic rewards. When you enter the negotiation phase, you are on the platform where those horror stories first take shape, and you simply cannot afford to be in a merry, exultant mood. Getting funded assures your business a future. But, how you handle the negotiation of the investment terms will determine what say you will have in building that future, and how much of the economic value you will own. Recall that you are at a distinct disadvantage in this negotiation because your investor has negotiated dozens of such transactions and you have negotiated probably a very small number, or none. You are the guy who walks into a high-stakes poker game and announces, by your own ignorance, that you want the seasoned poker players to teach you the game. They will.

               You are allowed your moment of excitement. And then you need to get organized. Thankfully, in Chapter 4 you have already learned how to create and introduce a timeline in order to take charge of the negotiation process. Bring this timeline forward as soon as your investor announces they want to invest. Announce to your investor that you would like to get the important transaction issues set down on paper so you can both look at them and begin to agree on deal points. Offer to draft the initial term sheet yourself. You will employ a corporate attorney who has experience in drafting term sheets for early-stage investments, which will cost you money you probably do not have. But, drafting the initial term sheet allows you to define the terms of the negotiation, and this is crucial for your ability to find agreement with the investor on all of the issues that are important to you. Investors are also often negotiating multiple term sheets simultaneously, and so your offer to draft the initial term sheet will likely be accepted.

Before we begin to discuss how to negotiate a successful transaction, it is important you have a basic understanding of the typical deal points that are going to be negotiated. While term sheets vary, for different types of transactions, for most early-stage investments the following outline covers the majority of the relevant topics. Take time to read and re-read this document before we begin to discuss how to negotiate. Remember, you are at a disadvantage, the stakes are high, and you need a thorough education before you begin.   (END  Excerpt)