Why this book
Brad Feld and Jason Mendelson wrote this book after living through a financing in late 2005 that went badly wrong for reasons that had nothing to do with the business — it went wrong because nobody in the room, founders included, understood what the term sheet in front of them actually did. Feld is a venture capitalist at Foundry Group in Boulder; Mendelson, his partner there, spent years as a VC's in-house lawyer before that. Between them they had watched enough deals from both sides of the table to know exactly where entrepreneurs get outmaneuvered, and it usually isn't on the number everyone fixates on — the valuation. It's buried in clauses about liquidation preferences, option pools, and board seats that most founders sign without pricing out what they're worth.
Their argument is that a term sheet's dozens of clauses collapse into just two things that actually matter: economics (who gets paid, and how much, when the company is sold or goes public) and control (who gets to make, or block, major decisions along the way). Everything else is negotiating theater — VCs sometimes push hard on minor clauses simply because pushing hard is what they know how to do, and a founder who can tell the difference between a clause worth fighting for and one worth conceding fast saves both leverage and goodwill for where it counts. The book walks through each major term — pre- and post-money valuation, liquidation preferences, anti-dilution protection, vesting, protective provisions, board composition — explaining not just what it says but what it's designed to do to you, before moving into convertible debt, the cap table, how VC funds themselves are structured, and how to actually run a fundraising process and a later acquisition.
Who should read it
First-time founders about to sit across from a VC for the first time are the core audience, along with the lawyers, advisors, and early employees with options who need to understand what's actually happening to the company's ownership structure. It will frustrate readers hoping for inspiration or big-picture strategy — this is a mechanics manual, dense with specific clause language and worked-out payout scenarios, and it assumes you're already raising money rather than dreaming about it.
About the author
Brad Feld is a venture capitalist and co-founder of Foundry Group in Boulder, Colorado, who began investing in technology startups in the early 1990s as an angel investor before moving into institutional venture capital; he also co-founded the startup accelerator Techstars. Jason Mendelson is a co-founder of Foundry Group and previously served as managing director and general counsel at Mobius Venture Capital, after starting his career as a corporate attorney and, before that, a technology consultant.