VCs Not As Focused On Tough Terms

from the back-to-normal dept

In the late nineties it was clear that the entrepreneurs had an awful lot of power over venture capitalists in striking deals with terms in their favor. In the last two years the pendulum has swung way back to the point that venture capitalists were getting ridiculous deals including things such as 8 to 12 times liquidation preferences (meaning in the event of a sale, the VCs would get 8 to 12 times their money before anyone else would see a penny). Now VCs are beginning to calm down and are offering more reasonable terms for a lot of deals. Some think this is a sign that maybe we’re getting back to normal again. I think VCs were realizing that they were simply killing their companies. If the company management knows it won’t get any money out of a sale, where’s the incentive for them to do anything?

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