How VCs Look At Term Sheets
Mark Suster is on a roll. Yesterday he wrote a great post on how VCs calculate valuation differently from founders. I spent a lot of time researching term sheets and valuation 3 years ago when raising money for my last company. I wish I had read this post back then; it would have saved me a lot of time. So go read it. Or better yet, watch the video:
In the video, Mark and Kelly Hwang walk through a very useful cap table spreadsheet. If you are an entrepreneur or interested in VC, go download it. Play around with the formulas. Run through different scenarios in your head. Or better yet, create your own from scratch. That's what I did and I think that's the best way to learn it on your own.
Other great resources for learning about term sheets are:
- VentureHacks' archive (specifically Nivi's article on how to make a cap table)
- Brad Feld's “term sheet series”
- Justin Fishner-Wolfson's Term Sheets 101 presentation
Chris Sacca mentioned in a video interview recently that VCs are being much more transparent than they used to be. And that's a good thing. This is complicated stuff and the more transparency, awareness, and overall education we have on the subject the better.
