Found+READ: Comments by Babak Nivi

Babak Nivi — Fri, 20 Apr 2007 04:57:22 GMT

Big V, Your comment rules. Do you have a blog or contact info?

Babak Nivi — Mon, 23 Apr 2007 23:12:44 GMT

Aydin, is there any reason to wait until the financing to paper the vesting agreements?

Babak Nivi — Tue, 24 Apr 2007 19:15:17 GMT

My suggestion for lesson number four:

4. Don’t enter a market with low barriers to entry by competitors and substitutes.

Babak Nivi — Sat, 28 Apr 2007 10:11:22 GMT

Bill, Aydin,

I don’t really see why co-founders shouldn’t have vesting schedules. Your co-founders may be the most trustworthy people in the universe. But they still may have to leave the business due to unforseen circumstances.

What if they have a child and need to get a job immediately for cashflow. What if they fall ill? What if their father falls ill and they have to take care of him for a year?

Do you really want to use peer pressure to buy back your co-founder’s shares at that point?

Babak Nivi — Fri, 27 Apr 2007 18:57:37 GMT

Sean,

VPs and CEOs can negotiate about 25% acceleration of unvested shares. Other employees usually get no acceleration upon termination.

Babak Nivi — Thu, 17 May 2007 12:58:39 GMT

Congratulations. I only skimmed the article but here are a couple thoughts:

1. I like to do as much due diligence as possible before signing a term sheet. Term sheets usually have a “no shop agreement” that prevents you from shopping the investment to other firms after you sign the term sheet. If there is still due diligence to do, your investors have too much leverage during the diligence process.

2. It seems like you had no competition for the investment. It shouldn’t take two months to go from term sheet to cash in the bank (although anything is possible with a corporate investor). It should take under 4 weeks. It have seen it done in 2 weeks—although that is really out of the ordinary. Competition and alternatives keep the pressure on your investors and move things along.

Babak Nivi — Fri, 08 Jun 2007 04:42:09 GMT

My favorite recruiting advice: “Make no small plans for they have no power to stir the soul.”

Good stuff attracts good people.

Babak Nivi — Tue, 08 May 2007 06:20:04 GMT

Aydin: No shops are described here http://www.burningdoor.com/askthewizard/2007/04/fundraisi…

Adam: 4 weeks is from term sheet to closing. Fund raising can take from 1 month to forever depending on demand.

Babak Nivi — Thu, 24 May 2007 07:07:34 GMT

Amit,

Why are you trying to establish a valuation? If it is because you are trying to raise money, your valuation is the market clearing price. Things are worth what people pay for them. That’s it.

Decide how much money you want to raise in this round.

Once you have the $ amount established, your angels will probably ask for 10%-20% of the company in return for that amount.

Alternatively, do a debt round. More on debt here: http://www.venturehacks.com/term-sheet-hacks#convertible-…

Decide how much $ you want to raise by figuring out how much it is going to take to do your next round at a 2x-3x increase in valuation.

Babak Nivi — Wed, 30 May 2007 22:20:47 GMT

Brad Feld has a good discussion of dividends here: http://www.feld.com/blog/archives/000328.html

My question to “Services Founder” would be what do the rest of the terms look like? Or who is the firm? That will tell you whether you are dealing with a legit firm or a “vulture capitalist”.