Tuesday, November 11, 2008

Notes from TiE-ISBConnect - Shantanu Surpure, Sand Hill Counsel

Shantanu Surpure is Managing Attorney at Sand Hill Counsel, a law firm with offices in Mumbai and Silicon Valley. He focuses on venture capital and private equity transactions. Shantanu holds a BA from Brown University/London School of Economics, an MA Juris from Oxford University and a Juris Doctor from Columbia Law School and is admitted to practice law in India, California, New York and England and Wales.

Shantanu spoke about Negotiating with VCs.

  • Be organized and document everything properly.
  • Hire a lawyer when negotiating with a VC because they will have one of their own.
  • VC's will do a valuation and will ask for anything between 25% to 40% of the company in the form of preference shares.
  • When the VCs have an interest in investing they will give you something called a term sheet which will have all the terms and conditions.
  • VCs usually look at a 3-5 year investment horizon.
  • In the term sheet there will be anti dilution terms which means that if the valuation of the company falls they might want more stock.
  • VC's will want one or more people on the company's board and this has to be negotiated.
  • They will want to have rights to veto certain decisions made by the company.
  • They will have clauses on any mergers and acquisitions that the company may plan to make in the future and also the hiring and firing of the CEO.
  • There will be terms on drag along and tag along which is related to what will happen if either the VC or the entrepreneur quits the organization.
  • There can be no shop clauses which means that you cannot talk to other VCs.
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