How To Work With Angel Groups

Published: 1/2/2008 11:29:19 AM

As part of an ongoing series about entrepreneurs working with angel groups, this post is a second part of the due diligence process: deal terms

Angel groups will usually begin discussing terms while they are performing due diligence on you and your company.  The reason is that they want to send out deal feelers to see if there is a basis for negotiating a deal before they spend too much time in due diligence. 

When discussing deal terms, many entrepreneurs get stuck on trying to be a tough negotiator.  It's understandable - you've worked hard to get your company to where it is, and you want to control the process as much as possible.  In addition, you want to keep as much of your company as you can.  Sophisticated angels understand this because they are usually entrepreneurs themselves!

I counsel entrepreneurs to focus more on getting the right angels as their investors, and less on squeezing the last nitpick deal term.  Reasonable negotiation is fine, and a good indicator of both parties' definition of a company's value, but if you find yourself spending in inordinate amount of time wrangling over negotiating points, it may be worthwhile to step back and ask yourself if you are focused too much on the fine points, to the detriment of moving forward and getting the financing done.

As for the various deal terms themselves, there are numerous books that can help you get a clearer understanding.  In any event, you should have competent legal counsel that is not conflicted representing your interests.

Don Jones



Don Jones
CEO, VentureDeal

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