Venture Deals
Be Smarter Than Your Lawyer and Venture Capitalist
Authors: Brad Feld & Jason Mendelson
Length: 352 pages (~8 hour read)
Formats: Paperback, Kindle, Audible
Grab your copy of Venture Deals on Amazon here.
Why This Book Matters
If you’re raising capital—or even thinking about it—Venture Deals is essential reading. Written by two veteran VCs, this book demystifies how venture capital works, from term sheets to board dynamics. It doesn’t just help you avoid mistakes; it helps you negotiate like a pro. Whether you’re a first-time founder or an experienced entrepreneur looking to fund your next big move, this book turns a black-box process into something you can confidently navigate.
Core Idea
Venture capital isn’t just about getting money—it’s about understanding the rules of the game. Feld and Mendelson break down every part of a startup financing deal, showing how terms like liquidation preference, anti-dilution, and board control affect your future. The central idea: Founders who understand the mechanics of VC funding can avoid painful surprises and shape deals that support long-term success.
Key Tactics & How to Apply Them
1. Understand the Term Sheet—Don’t Just Chase the Valuation
The term sheet is where the power dynamics are set. High valuations may feel good, but the hidden terms often matter more.
How to apply: Learn the key clauses—liquidation preferences, participation rights, option pools, and anti-dilution. Evaluate the structure of the deal, not just the headline number.
2. Know the Players and Their Incentives
VCs aren’t just writing checks—they’re managing funds with their own timelines, goals, and pressures.
How to apply: Ask what fund the money is coming from and how much of it is left. Understand if you’re early in a fund’s life (more risk-taking) or late (more pressure to show returns). Tailor your pitch and expectations accordingly.
3. Negotiate Control Rights, Not Just Economics
Board seats, voting thresholds, and protective provisions matter as much as the money.
How to apply: Maintain founder-friendly governance when possible. Push back on terms that require VC consent for everyday decisions. Ensure you’re not giving up too much control too early.
4. Beware the Option Pool Shuffle
Many VCs ask founders to increase the option pool before funding, effectively lowering your true valuation.
How to apply: Model out the post-money cap table with and without this adjustment. Negotiate the option pool expansion to occur after the investment, or make sure you’re compensated with a higher valuation.
5. Don’t Go It Alone—But Don’t Outsource Everything Either
Good legal counsel is crucial, but founders need to understand the structure of deals themselves.
How to apply: Use your lawyer as a guide, not a shield. Read every term sheet and understand the implications. If you don’t understand a clause, ask until you do.
6. Treat Financing Like a Relationship, Not a Transaction
The best VCs are long-term partners. Terms are important, but alignment is critical.
How to apply: Vet your investors as thoroughly as they vet you. Talk to other founders they’ve backed. Look beyond the brand name—look at behavior post-close.
7. Learn the Game Before You Need to Play It
The worst time to learn how VC works is when you’re desperate for cash.
How to apply: Read this book before you start raising. Build a model for your round, run cap table simulations, and create alignment among co-founders and advisors early.
Real-World Example
A SaaS founder raised a $5M Series A at a strong valuation but ignored the liquidation preference and participating preferred language. Five years later, the company sold for $40M. Founders expected a meaningful payday—but the VC’s 2x participating preferred meant they took $20M off the top, then shared the rest. The founders each walked away with far less than expected. After reading Venture Deals, the founder said, “I finally understood the deal I signed—and why I wouldn’t do it the same way again.”
When to Use This Book
You’re planning to raise VC money for the first time
You’ve already received a term sheet and need to decode it fast
You want to avoid giving up too much control or economics
You’re advising startups or negotiating on their behalf
You want to raise capital from a position of strength, not ignorance
Grab your copy of Venture Deals on Amazon here.