VC Minute – quick advice to help startup founders fundraise better
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I’ll share a key phrase that Charlie and I learned. And that is saying, “That’s the business agreement.” I think this is lawyer-speak for, “Let it go, we’ve already agreed to it separately.”
When it comes down to these last-minute exchanges, tensions will rise, and everyone will lose the forest for the trees. “The business agreement” will let you plow through last-minute roadblocks, but you can only do that when the lead VC and the CEO are deeply aligned.
And this brings it back around to where we started. A strong rapport between the lead VC and the startup CEO is the single most important thing. When you have built that trust, you can better direct the lawyers, cut out the costly back and forth, and come out of the process with a relationship fortified by it rather than fractured by it.
For the founders out there, one of the best things that you can do is talk to other founders who have worked with this investor. What was the process like in negotiating with them? How did they change during the process? How did they change after the process? Did they follow through with the deal docs on everything that they promised in the term sheet? If not, what changed?
Back channeling is something that VCs do all the time, and so founders, you should be out there doing it too. You should be back-channeling on the venture funds that you’re talking with in order to get feedback so that you know who you’re dealing with.
This round and this situation were unusual in every way possible. What ended up happening as a result was that Charlie and I formed a deep level of trust and understanding. I could still negotiate as a fiduciary of my investors’ money. But as a partner with the CEO in this process, I could do it in a way where we could achieve mutually agreeable outcomes.
Having that strong relationship was able to pull us across the finish line, get the deal docs done, and get this round finally done, closed, and in the books. And now Moxey’s off to the races, and I think we’re all going to be better for it.
About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)
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