manager
Deal terms
Classification
Benefit
Cost
Inspection right
Postive sum
1. Benefit for both parties.
2. Giving information to the venture capitalists to protect their interest in the venture.
3. Allow the venture to run with supervision, it will enhance the efficiency and quality.
1. Little cost for both parties.
2. Time and very little money spent on the inspection process for both parties.
Seats on the board
Zero sum
Increase one party’s seat is the lost one for another party.
VC approval
Positive sum
1. VC have expertise, and resourses in the venture capital industry, their votes is valuable for making decisions.
2. Benefit for VC, they could decide the direction of the company for their interest.
3. Benefit for the venture too. VC share many common goals (not all) with the venture itself, so vote can be valuable for the venture to prevent some bad decision.
1. Cost to venture is sometimes the venture could not make decision in a best way for the purpose of the development of itself, like exit.
2. That is because sometimes the VC and Venture do not share the same goals.
Piggyback registration
Zero sum.
1. Grants the investor the right to register his or her unregistered stock when either the company or another investor initiates a registration.
Registration fee cost a lot, and it is undertaken by the venture itself.
Pre-money valuation
Zero sum
Pre-money valuation sets up the basic proportion of VC’s shares, the cost is the dilution of the the entrepreneur’s shares.
Control of the Auditing Committee
Postive sum
Control of the Audit committee by VC does not hurt the the venture.
Control of the Compensation Committee
Zero sum
Control of the compensation committee is good for the VC, giving them the right to compensate entrepreneurs and other staff as they think is proper in the standpoint of VC’s interest.
1. Entrepreneurs and other staff may find they are compensated less than they think they should get.
2. VC could decide to
Classification
Benefit
Cost
Inspection right
Postive sum
1. Benefit for both parties.
2. Giving information to the venture capitalists to protect their interest in the venture.
3. Allow the venture to run with supervision, it will enhance the efficiency and quality.
1. Little cost for both parties.
2. Time and very little money spent on the inspection process for both parties.
Seats on the board
Zero sum
Increase one party’s seat is the lost one for another party.
VC approval
Positive sum
1. VC have expertise, and resourses in the venture capital industry, their votes is valuable for making decisions.
2. Benefit for VC, they could decide the direction of the company for their interest.
3. Benefit for the venture too. VC share many common goals (not all) with the venture itself, so vote can be valuable for the venture to prevent some bad decision.
1. Cost to venture is sometimes the venture could not make decision in a best way for the purpose of the development of itself, like exit.
2. That is because sometimes the VC and Venture do not share the same goals.
Piggyback registration
Zero sum.
1. Grants the investor the right to register his or her unregistered stock when either the company or another investor initiates a registration.
Registration fee cost a lot, and it is undertaken by the venture itself.
Pre-money valuation
Zero sum
Pre-money valuation sets up the basic proportion of VC’s shares, the cost is the dilution of the the entrepreneur’s shares.
Control of the Auditing Committee
Postive sum
Control of the Audit committee by VC does not hurt the the venture.
Control of the Compensation Committee
Zero sum
Control of the compensation committee is good for the VC, giving them the right to compensate entrepreneurs and other staff as they think is proper in the standpoint of VC’s interest.
1. Entrepreneurs and other staff may find they are compensated less than they think they should get.
2. VC could decide to