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Venture Capital

After the Term Sheet

An article in this morning’s Wall St. Journal pointed me at this recent white paper titled “After the Term Sheet – How Venture Boards Influence the Success or Failure of Technology Companies.

Mr. Levensohn, who cowrote his report with corporate-governance expert Dennis T. Jaffee, says the misalignment of interests has evolved into a “major problem” in Silicon Valley. When early and later investors have different financial concerns that don’t align, they must resolve “difficult competing agendas” that can either deadlock or severely compromise the company’s future, the report says. Such “financing engineering” is no way to build a company, contributors to the report say.

Selection of investors — by both the entrepreneur and, indeed, by investors themselves looking at each other — is critically important to shared success.

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